ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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13-3317783
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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Indicate by check mark:
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Yes
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No
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• whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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ý
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¨
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• whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
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ý
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¨
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• whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
x
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Accelerated filer
¨
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Non-accelerated filer
¨
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Smaller reporting company
¨
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Emerging growth company
¨
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• whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)
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¨
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ý
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Item
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Description
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Page
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1.
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FINANCIAL STATEMENTS
|
|
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
|
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2017 AND 2016
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|
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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2017 AND 2016
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CONDENSED CONSOLIDATED BALANCE SHEETS - AS OF JUNE 30, 2017 AND DECEMBER 31, 2016
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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2016
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2016
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|
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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2.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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3.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
|
4.
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CONTROLS AND PROCEDURES
|
|
|
|
|
1.
|
LEGAL PROCEEDINGS
|
|
1A.
|
RISK FACTORS
|
|
2.
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UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
|
6.
|
EXHIBITS
|
|
|
|
|
|
SIGNATURE
|
|
|
EXHIBITS INDEX
|
•
|
Risks Related to Economic, Political and Global Market Conditions:
|
◦
|
challenges related to the Company’s current operating environment, including global political, economic and market conditions, and the effect of financial market disruptions, economic downturns or other potentially adverse macroeconomic developments on the demand for our products, returns in our investment portfolios and the hedging costs associated with our run-off annuity block;
|
◦
|
financial risk related to the continued reinvestment of our investment portfolios and performance of our hedge program for our run-off annuity block;
|
◦
|
market risks associated with our business, including changes in credit spreads, equity prices, interest rates, inflation rate, market volatility and foreign exchange rates;
|
◦
|
the impact on our investment portfolio if our investment portfolio is concentrated in any particular segment of the economy;
|
•
|
Insurance Industry and Product-Related Risks:
|
◦
|
the possibility of unfavorable loss development, including with respect to long-tailed exposures;
|
◦
|
the possibility of a pandemic, earthquake, or other natural or man-made disaster that may adversely affect our businesses;
|
◦
|
weather and other natural physical events, including the severity and frequency of storms, hail, winter storms, hurricanes and tropical storms, as well as climate change and its potential impact on weather patterns;
|
◦
|
the possible occurrence of terrorist attacks and the Company’s inability to contain its exposure as a result of, among other factors, the inability to exclude coverage for terrorist attacks from workers' compensation policies and limitations on reinsurance coverage from the federal government under applicable laws;
|
◦
|
the Company’s ability to effectively price its property and casualty policies, including its ability to obtain regulatory consents to pricing actions or to non-renewal or withdrawal of certain product lines;
|
◦
|
actions by competitors that may be larger or have greater financial resources than we do;
|
◦
|
technology changes, such as usage-based methods of determining premiums, advancement in automotive safety features, the development of autonomous vehicles, and platforms that facilitate ride sharing, which may alter demand for the Company's products, impact the frequency or severity of losses, and/or impact the way the Company markets, distributes and underwrites its products;
|
◦
|
the Company’s ability to market, distribute and provide insurance products and investment advisory services through current and future distribution channels and advisory firms;
|
◦
|
the uncertain effects of emerging claim and coverage issues;
|
◦
|
volatility in our statutory and United States ("U.S.") Generally Accepted Accounting Principles ("GAAP") earnings and potential material changes to our results resulting from our risk management program to emphasize protection of economic value;
|
•
|
Financial Strength, Credit and Counterparty Risks:
|
◦
|
risks to our business, financial position, prospects and results associated with negative rating actions or downgrades in the Company’s financial strength and credit ratings or negative rating actions or downgrades relating to our investments;
|
◦
|
the impact on our statutory capital of various factors, including many that are outside the Company’s control, which can in turn affect our credit and financial strength ratings, cost of capital, regulatory compliance and other aspects of our business and results;
|
◦
|
losses due to nonperformance or defaults by others, including sourcing partners, derivative counterparties and other third parties;
|
◦
|
the potential for losses due to our reinsurers’ unwillingness or inability to meet their obligations under reinsurance contracts and the availability, pricing and adequacy of reinsurance to protect the Company against losses;
|
•
|
Risks Relating to Estimates, Assumptions and Valuations;
|
◦
|
risk associated with the use of analytical models in making decisions in key areas such as underwriting, capital management, hedging, reserving, and catastrophe risk management;
|
◦
|
the potential for differing interpretations of the methodologies, estimations and assumptions that underlie Company’s fair value estimates for its investments and the evaluation of other-than-temporary impairments on available-for-sale securities;
|
◦
|
the potential for further acceleration of deferred policy acquisition cost amortization and an increase in reserve for certain guaranteed benefits in our variable annuities;
|
◦
|
the potential for further impairments of our goodwill or the potential for changes in valuation allowances against deferred tax assets;
|
◦
|
the significant uncertainties that limit our ability to estimate the ultimate reserves necessary for asbestos and environmental claims;
|
•
|
Strategic and Operational Risks:
|
◦
|
risks associated with the run off of our Talcott Resolution business;
|
◦
|
the Company’s ability to maintain the availability of its systems and safeguard the security of its data in the event of a disaster, cyber or other information security incident or other unanticipated event;
|
◦
|
the risks, challenges and uncertainties associated with our capital management plan, expense reduction initiatives and other actions, which may include acquisitions, divestitures or restructurings;
|
◦
|
the potential for difficulties arising from outsourcing and similar third-party relationships;
|
◦
|
the Company’s ability to protect its intellectual property and defend against claims of infringement;
|
•
|
Regulatory and Legal Risks:
|
◦
|
the cost and other potential effects of increased regulatory and legislative developments, including those that could adversely impact the demand for the Company’s products, operating costs and required capital levels;
|
◦
|
unfavorable judicial or legislative developments;
|
◦
|
the impact of changes in federal or state tax laws;
|
◦
|
regulatory requirements that could delay, deter or prevent a takeover attempt that shareholders might consider in their best interests; and
|
◦
|
the impact of potential changes in accounting principles and related financial reporting requirements.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
(In millions, except for per share data)
|
2017
|
2016
|
|
2017
|
2016
|
||||||||
|
(Unaudited)
|
||||||||||||
Revenues
|
|
|
|
|
|
||||||||
Earned premiums
|
$
|
3,490
|
|
$
|
3,444
|
|
|
$
|
6,963
|
|
$
|
6,848
|
|
Fee income
|
466
|
|
441
|
|
|
921
|
|
886
|
|
||||
Net investment income
|
715
|
|
735
|
|
|
1,443
|
|
1,431
|
|
||||
Net realized capital gains (losses):
|
|
|
|
|
|
||||||||
Total other-than-temporary impairment ("OTTI") losses
|
(16
|
)
|
(8
|
)
|
|
(19
|
)
|
(35
|
)
|
||||
OTTI losses recognized in other comprehensive income (“OCI”)
|
2
|
|
1
|
|
|
4
|
|
5
|
|
||||
Net OTTI losses recognized in earnings
|
(14
|
)
|
(7
|
)
|
|
(15
|
)
|
(30
|
)
|
||||
Other net realized capital gains (losses)
|
89
|
|
60
|
|
|
70
|
|
(72
|
)
|
||||
Total net realized capital gains (losses)
|
75
|
|
53
|
|
|
55
|
|
(102
|
)
|
||||
Other revenues
|
23
|
|
23
|
|
|
42
|
|
43
|
|
||||
Total revenues
|
4,769
|
|
4,696
|
|
|
9,424
|
|
9,106
|
|
||||
Benefits, losses and expenses
|
|
|
|
|
|
||||||||
Benefits, losses and loss adjustment expenses
|
2,767
|
|
3,142
|
|
|
5,524
|
|
5,783
|
|
||||
Amortization of deferred policy acquisition costs ("DAC")
|
368
|
|
368
|
|
|
731
|
|
742
|
|
||||
Insurance operating costs and other expenses
|
1,692
|
|
931
|
|
|
2,657
|
|
1,859
|
|
||||
Interest expense
|
81
|
|
85
|
|
|
164
|
|
171
|
|
||||
Total benefits, losses and expenses
|
4,908
|
|
4,526
|
|
|
9,076
|
|
8,555
|
|
||||
Income before income taxes
|
(139
|
)
|
170
|
|
|
348
|
|
551
|
|
||||
Income tax expense (benefit)
|
(99
|
)
|
(46
|
)
|
|
10
|
|
12
|
|
||||
Net income (loss)
|
$
|
(40
|
)
|
$
|
216
|
|
|
$
|
338
|
|
$
|
539
|
|
Net income (loss) per common share
|
|
|
|
|
|
|
|||||||
Basic
|
$
|
(0.11
|
)
|
$
|
0.55
|
|
|
$
|
0.92
|
|
$
|
1.36
|
|
Diluted
|
$
|
(0.11
|
)
|
$
|
0.54
|
|
|
$
|
0.90
|
|
$
|
1.34
|
|
Cash dividends declared per common share
|
$
|
0.23
|
|
$
|
0.21
|
|
|
$
|
0.46
|
|
$
|
0.42
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
(In millions)
|
2017
|
2016
|
|
2017
|
2016
|
||||||||
|
(Unaudited)
|
||||||||||||
Net income (loss)
|
$
|
(40
|
)
|
$
|
216
|
|
|
$
|
338
|
|
$
|
539
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
||||||||
Changes in net unrealized gain on securities
|
342
|
|
636
|
|
|
479
|
|
1,158
|
|
||||
Changes in OTTI losses recognized in other comprehensive income
|
1
|
|
5
|
|
|
—
|
|
(3
|
)
|
||||
Changes in net gain on cash flow hedging instruments
|
(1
|
)
|
16
|
|
|
(19
|
)
|
70
|
|
||||
Changes in foreign currency translation adjustments
|
5
|
|
(19
|
)
|
|
7
|
|
(13
|
)
|
||||
Changes in pension and other postretirement plan adjustments
|
354
|
|
8
|
|
|
364
|
|
17
|
|
||||
OCI, net of tax
|
701
|
|
646
|
|
|
831
|
|
1,229
|
|
||||
Comprehensive income
|
$
|
661
|
|
$
|
862
|
|
|
$
|
1,169
|
|
$
|
1,768
|
|
(In millions, except for share and per share data)
|
June 30,
2017 |
December 31, 2016
|
||||
|
(Unaudited)
|
|||||
Assets
|
|
|||||
Investments:
|
|
|
||||
Fixed maturities, available-for-sale, at fair value (amortized cost of $54,800 and $53,805)
|
$
|
57,834
|
|
$
|
56,003
|
|
Fixed maturities, at fair value using the fair value option
|
146
|
|
293
|
|
||
Equity securities, available-for-sale, at fair value (cost of $964 and $1,020)
|
1,055
|
|
1,097
|
|
||
Mortgage loans (net of allowances for loan losses of $1 and $19)
|
5,796
|
|
5,697
|
|
||
Policy loans, at outstanding balance
|
1,433
|
|
1,444
|
|
||
Limited partnerships and other alternative investments
|
2,445
|
|
2,456
|
|
||
Other investments
|
355
|
|
403
|
|
||
Short-term investments
|
4,716
|
|
3,244
|
|
||
Total investments
|
73,780
|
|
70,637
|
|
||
Cash (includes variable interest entity assets, at fair value, of $0 and $5)
|
362
|
|
882
|
|
||
Premiums receivable and agents’ balances, net
|
3,846
|
|
3,731
|
|
||
Reinsurance recoverables, net
|
23,265
|
|
23,311
|
|
||
Deferred policy acquisition costs
|
1,648
|
|
1,711
|
|
||
Deferred income taxes, net
|
2,868
|
|
3,281
|
|
||
Goodwill
|
567
|
|
567
|
|
||
Property and equipment, net
|
974
|
|
991
|
|
||
Other assets
|
1,807
|
|
1,786
|
|
||
Assets held for sale
|
—
|
|
870
|
|
||
Separate account assets
|
116,746
|
|
115,665
|
|
||
Total assets
|
$
|
225,863
|
|
$
|
223,432
|
|
Liabilities
|
|
|
||||
Unpaid losses and loss adjustment expenses
|
$
|
27,839
|
|
$
|
27,605
|
|
Reserve for future policy benefits
|
14,156
|
|
13,929
|
|
||
Other policyholder funds and benefits payable
|
30,466
|
|
31,176
|
|
||
Unearned premiums
|
5,573
|
|
5,499
|
|
||
Short-term debt
|
320
|
|
416
|
|
||
Long-term debt
|
4,817
|
|
4,636
|
|
||
Other liabilities (includes variable interest entity liabilities of $0 and $5)
|
8,658
|
|
6,992
|
|
||
Liabilities held for sale
|
—
|
|
611
|
|
||
Separate account liabilities
|
116,746
|
|
115,665
|
|
||
Total liabilities
|
$
|
208,575
|
|
$
|
206,529
|
|
Commitments and Contingencies (Note 12)
|
|
|
||||
Stockholders’ Equity
|
|
|
||||
Common stock, $0.01 par value — 1,500,000,000 shares authorized, 402,923,222 and 402,923,222 shares issued
|
4
|
|
4
|
|
||
Additional paid-in capital
|
5,195
|
|
5,247
|
|
||
Retained earnings
|
13,282
|
|
13,114
|
|
||
Treasury stock, at cost — 40,103,642 and 28,974,069 shares
|
(1,687
|
)
|
(1,125
|
)
|
||
Accumulated other comprehensive income ("AOCI"), net of tax
|
494
|
|
(337
|
)
|
||
Total stockholders’ equity
|
$
|
17,288
|
|
$
|
16,903
|
|
Total liabilities and stockholders’ equity
|
$
|
225,863
|
|
$
|
223,432
|
|
|
Six Months Ended June 30,
|
|||||
(In millions, except for share data)
|
2017
|
2016
|
||||
|
(Unaudited)
|
|||||
Common Stock
|
$
|
4
|
|
$
|
5
|
|
Additional Paid-in Capital, beginning of period
|
5,247
|
|
8,973
|
|
||
Issuance of shares under incentive and stock compensation plans
|
(65
|
)
|
(129
|
)
|
||
Stock-based compensation plans expense
|
56
|
|
39
|
|
||
Tax benefit on employee stock options and share-based awards
|
—
|
|
22
|
|
||
Issuance of shares for warrant exercise
|
(43
|
)
|
(8
|
)
|
||
Additional Paid-in Capital, end of period
|
5,195
|
|
8,897
|
|
||
Retained Earnings, beginning of period
|
13,114
|
|
12,550
|
|
||
Net income
|
338
|
|
539
|
|
||
Dividends declared on common stock
|
(170
|
)
|
(166
|
)
|
||
Retained Earnings, end of period
|
13,282
|
|
12,923
|
|
||
Treasury Stock, at cost, beginning of period
|
(1,125
|
)
|
(3,557
|
)
|
||
Treasury stock acquired
|
(650
|
)
|
(700
|
)
|
||
Issuance of shares under incentive and stock compensation plans
|
79
|
|
130
|
|
||
Net shares acquired related to employee incentive and stock compensation plans
|
(34
|
)
|
(47
|
)
|
||
Issuance of shares for warrant exercise
|
43
|
|
8
|
|
||
Treasury Stock, at cost, end of period
|
(1,687
|
)
|
(4,166
|
)
|
||
Accumulated Other Comprehensive Loss, net of tax, beginning of period
|
(337
|
)
|
(329
|
)
|
||
Total other comprehensive income
|
831
|
|
1,229
|
|
||
Accumulated Other Comprehensive Income, net of tax, end of period
|
494
|
|
900
|
|
||
Total Stockholders’ Equity
|
$
|
17,288
|
|
$
|
18,559
|
|
Common Shares Outstanding, beginning of period (in thousands)
|
373,949
|
|
401,821
|
|
||
Treasury stock acquired
|
(13,299
|
)
|
(16,222
|
)
|
||
Issuance of shares under incentive and stock compensation plans
|
1,850
|
|
3,203
|
|
||
Return of shares under incentive and stock compensation plans to treasury stock
|
(686
|
)
|
(1,078
|
)
|
||
Issuance of shares for warrant exercise
|
1,006
|
|
192
|
|
||
Common Shares Outstanding, at end of period
|
362,820
|
|
387,916
|
|
|
Six Months Ended June 30,
|
|||||
(In millions)
|
2017
|
2016
|
||||
Operating Activities
|
(Unaudited)
|
|||||
Net income
|
$
|
338
|
|
$
|
539
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
||||
Net realized capital (gains) losses
|
(55
|
)
|
102
|
|
||
Amortization of deferred policy acquisition costs
|
731
|
|
742
|
|
||
Additions to deferred policy acquisition costs
|
(695
|
)
|
(708
|
)
|
||
Depreciation and amortization
|
191
|
|
184
|
|
||
Pension settlement
|
747
|
|
—
|
|
||
Other operating activities, net
|
291
|
|
114
|
|
||
Change in assets and liabilities:
|
|
|
||||
Decrease in reinsurance recoverables
|
25
|
|
62
|
|
||
Increase (decrease) in deferred and accrued income taxes
|
40
|
|
(150
|
)
|
||
Increase in unpaid losses and loss adjustment expenses, reserve for future policy benefits, and unearned premiums
|
443
|
|
301
|
|
||
Net change in other assets and other liabilities
|
(1,162
|
)
|
(370
|
)
|
||
Net cash provided by operating activities
|
894
|
|
816
|
|
||
Investing Activities
|
|
|
||||
Proceeds from the sale/maturity/prepayment of:
|
|
|
||||
Fixed maturities, available-for-sale
|
15,847
|
|
11,023
|
|
||
Fixed maturities, fair value option
|
76
|
|
85
|
|
||
Equity securities, available-for-sale
|
512
|
|
469
|
|
||
Mortgage loans
|
351
|
|
201
|
|
||
Partnerships
|
138
|
|
460
|
|
||
Payments for the purchase of:
|
|
|
||||
Fixed maturities, available-for-sale
|
(15,954
|
)
|
(10,691
|
)
|
||
Fixed maturities, fair value option
|
—
|
|
(76
|
)
|
||
Equity securities, available-for-sale
|
(397
|
)
|
(223
|
)
|
||
Mortgage loans
|
(458
|
)
|
(234
|
)
|
||
Partnerships
|
(222
|
)
|
(202
|
)
|
||
Net (payments for) proceeds from derivatives
|
(40
|
)
|
295
|
|
||
Net increase in policy loans
|
11
|
|
10
|
|
||
Net additions to property and equipment
|
(92
|
)
|
(137
|
)
|
||
Net payments for short-term investments
|
(1,453
|
)
|
(666
|
)
|
||
Other investing activities, net
|
(17
|
)
|
27
|
|
||
Proceeds from business sold, net of cash transferred
|
222
|
|
—
|
|
||
Net cash provided (used) by investing activities
|
(1,476
|
)
|
341
|
|
||
Financing Activities
|
|
|
||||
Deposits and other additions to investment and universal life-type contracts
|
2,526
|
|
2,182
|
|
||
Withdrawals and other deductions from investment and universal life-type contracts
|
(7,076
|
)
|
(8,070
|
)
|
||
Net transfers from separate accounts related to investment and universal life-type contracts
|
3,976
|
|
5,486
|
|
||
Repayments at maturity or settlement of consumer notes
|
(11
|
)
|
(6
|
)
|
||
Net increase in securities loaned or sold under agreements to repurchase
|
1,346
|
|
136
|
|
||
Repayment of debt
|
(416
|
)
|
—
|
|
||
Proceeds from the issuance of debt
|
500
|
|
—
|
|
||
Net (return) issuance of shares under incentive and stock compensation plans
|
(22
|
)
|
10
|
|
||
Treasury stock acquired
|
(650
|
)
|
(700
|
)
|
||
Dividends paid on common stock
|
(173
|
)
|
(170
|
)
|
||
Net cash provided (used) for financing activities
|
—
|
|
(1,132
|
)
|
||
Foreign exchange rate effect on cash
|
62
|
|
(12
|
)
|
||
Net (decrease) increase in cash
|
(520
|
)
|
13
|
|
||
Cash – beginning of period
|
882
|
|
448
|
|
||
Cash – end of period
|
$
|
362
|
|
$
|
461
|
|
Supplemental Disclosure of Cash Flow Information
|
|
|
||||
Income tax refunds received (paid)
|
$
|
2
|
|
$
|
(130
|
)
|
Interest paid
|
$
|
164
|
|
$
|
168
|
|
|
Carrying Value as of
|
|
|
Closing
|
December 31, 2016 [2]
|
Assets
|
|
|
Cash and investments
|
$669
|
$657
|
Reinsurance recoverables and other [1]
|
268
|
213
|
|
$937
|
$870
|
Liabilities
|
|
|
Reserve for future policy benefits and unpaid losses and loss adjustment expenses
|
$653
|
$600
|
Other liabilities
|
12
|
11
|
|
$665
|
$611
|
[1]
|
Includes intercompany reinsurance recoverables of
$71
settled in cash at closing.
|
[2]
|
Classified as assets and liabilities held for sale.
|
Computation of Basic and Diluted Earnings (Loss) per Common Share
|
|||||||||||||
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
(In millions, except for per share data)
|
2017
|
2016
|
|
2017
|
2016
|
||||||||
Earnings
|
|
|
|
|
|
||||||||
Net income (loss)
|
$
|
(40
|
)
|
$
|
216
|
|
|
$
|
338
|
|
$
|
539
|
|
Shares
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding, basic
|
366.0
|
|
391.8
|
|
|
368.7
|
|
395.2
|
|
||||
Dilutive effect of stock compensation plans
|
—
|
|
3.2
|
|
|
4.0
|
|
3.6
|
|
||||
Dilutive effect of warrants
|
—
|
|
3.6
|
|
|
2.8
|
|
3.6
|
|
||||
Weighted average common shares outstanding and dilutive potential common shares
|
366.0
|
|
398.6
|
|
|
375.5
|
|
402.4
|
|
||||
Net income (loss) per common share
|
|
|
|
|
|
||||||||
Basic
|
$
|
(0.11
|
)
|
$
|
0.55
|
|
|
$
|
0.92
|
|
$
|
1.36
|
|
Diluted
|
$
|
(0.11
|
)
|
$
|
0.54
|
|
|
$
|
0.90
|
|
$
|
1.34
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
|
2017
|
2016
|
|
2017
|
2016
|
||||||||
Commercial Lines [1]
|
$
|
258
|
|
$
|
237
|
|
|
$
|
489
|
|
$
|
462
|
|
Personal Lines [1]
|
24
|
|
(50
|
)
|
|
57
|
|
(27
|
)
|
||||
Property & Casualty Other Operations
|
20
|
|
(154
|
)
|
|
44
|
|
(137
|
)
|
||||
Group Benefits
|
69
|
|
55
|
|
|
114
|
|
105
|
|
||||
Mutual Funds
|
24
|
|
20
|
|
|
47
|
|
40
|
|
||||
Talcott Resolution
|
105
|
|
104
|
|
|
173
|
|
121
|
|
||||
Corporate
|
(540
|
)
|
4
|
|
|
(586
|
)
|
(25
|
)
|
||||
Net income
|
$
|
(40
|
)
|
$
|
216
|
|
|
$
|
338
|
|
$
|
539
|
|
[1]
|
For the three and six months ended June 30,
2016
there was a segment change which resulted in a movement from Commercial Lines to Personal Lines of
$3
and
$6
, respectively, of net servicing income associated with our participation in the National Flood Insurance Program.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
|
2017
|
2016
|
|
2017
|
2016
|
||||||||
Earned premiums and fee income
|
|
|
|
|
|
||||||||
Commercial Lines
|
|
|
|
|
|
||||||||
Workers’ compensation
|
$
|
820
|
|
$
|
775
|
|
|
$
|
1,633
|
|
$
|
1,534
|
|
Liability
|
152
|
|
148
|
|
|
300
|
|
291
|
|
||||
Package business
|
326
|
|
314
|
|
|
640
|
|
622
|
|
||||
Automobile
|
161
|
|
154
|
|
|
322
|
|
312
|
|
||||
Professional liability
|
60
|
|
55
|
|
|
120
|
|
108
|
|
||||
Bond
|
58
|
|
54
|
|
|
113
|
|
107
|
|
||||
Property
|
152
|
|
159
|
|
|
299
|
|
318
|
|
||||
Total Commercial Lines [1]
|
1,729
|
|
1,659
|
|
|
3,427
|
|
3,292
|
|
||||
Personal Lines
|
|
|
|
|
|
|
|
||||||
Automobile
|
660
|
|
687
|
|
|
1,322
|
|
1,372
|
|
||||
Homeowners
|
281
|
|
299
|
|
|
564
|
|
598
|
|
||||
Total Personal Lines [1] [2]
|
941
|
|
986
|
|
|
1,886
|
|
1,970
|
|
||||
Group Benefits
|
|
|
|
|
|
||||||||
Group disability
|
379
|
|
381
|
|
|
760
|
|
750
|
|
||||
Group life
|
394
|
|
376
|
|
|
793
|
|
751
|
|
||||
Other
|
51
|
|
51
|
|
|
106
|
|
102
|
|
||||
Total Group Benefits
|
824
|
|
808
|
|
|
1,659
|
|
1,603
|
|
||||
Mutual Funds
|
|
|
|
|
|
||||||||
Mutual Fund
|
176
|
|
147
|
|
|
343
|
|
289
|
|
||||
Talcott
|
25
|
|
25
|
|
|
49
|
|
50
|
|
||||
Total Mutual Funds
|
201
|
|
172
|
|
|
392
|
|
339
|
|
||||
Talcott Resolution
|
260
|
|
259
|
|
|
518
|
|
528
|
|
||||
Corporate
|
1
|
|
1
|
|
|
2
|
|
2
|
|
||||
Total earned premiums and fee income
|
3,956
|
|
3,885
|
|
|
7,884
|
|
7,734
|
|
||||
Net investment income
|
715
|
|
735
|
|
|
1,443
|
|
1,431
|
|
||||
Net realized capital gains (losses)
|
75
|
|
53
|
|
|
55
|
|
(102
|
)
|
||||
Other revenues
|
23
|
|
23
|
|
|
42
|
|
43
|
|
||||
Total revenues
|
$
|
4,769
|
|
$
|
4,696
|
|
|
$
|
9,424
|
|
$
|
9,106
|
|
[1]
|
Commercial Lines includes installment fees of
$9
and
$19
, respectively, for the three and six months ended June 30, 2017 and
$9
and
$19
, respectively, for the three and six months ended June 30, 2016. Personal Lines includes installment fees of
$11
and
$22
, respectively, for the three and six months ended June 30, 2017 and
$10
and
$19
, respectively, for the three and six months ended June 30, 2016.
|
[2]
|
For the
three months ended
June 30, 2017
and
2016
, AARP members accounted for earned premiums of
$800
and
$817
, respectively. For the six months ended
June 30, 2017
and
2016
, AARP members accounted for earned premiums of
$1.6 billion
and
$1.6 billion
, respectively.
|
Level 1
|
Fair values based primarily on unadjusted quoted prices for identical assets or liabilities, in active markets that the Company has the ability to access at the measurement date.
|
Level 2
|
Fair values primarily based on observable inputs, other than quoted prices included in Level 1, or based on prices for similar assets and liabilities.
|
Level 3
|
Fair values derived when one or more of the significant inputs are unobservable (including assumptions about risk). With little or no observable market, the determination of fair values uses considerable judgment and represents the Company’s best estimate of an amount that could be realized in a market exchange for the asset or liability. Also included are securities that are traded within illiquid markets and/or priced by independent brokers.
|
Assets and (Liabilities) Carried at Fair Value by Hierarchy Level as of June 30, 2017
|
||||||||||||
|
Total
|
Quoted Prices in
Active Markets for Identical Assets (Level 1) |
Significant
Observable Inputs (Level 2) |
Significant
Unobservable Inputs (Level 3) |
||||||||
Assets accounted for at fair value on a recurring basis
|
|
|
|
|
||||||||
Fixed maturities, AFS
|
|
|
|
|
||||||||
Asset-backed-securities ("ABS")
|
$
|
2,354
|
|
$
|
—
|
|
$
|
2,258
|
|
$
|
96
|
|
Collateralized debt obligations ("CDOs")
|
2,457
|
|
—
|
|
2,118
|
|
339
|
|
||||
Commercial mortgage-backed securities ("CMBS")
|
5,173
|
|
—
|
|
5,075
|
|
98
|
|
||||
Corporate
|
26,044
|
|
—
|
|
24,908
|
|
1,136
|
|
||||
Foreign government/government agencies
|
1,297
|
|
—
|
|
1,268
|
|
29
|
|
||||
Bonds of municipalities and political subdivisions ("municipal bonds")
|
12,284
|
|
—
|
|
12,198
|
|
86
|
|
||||
Residential mortgage-backed securities ("RMBS")
|
4,219
|
|
—
|
|
2,208
|
|
2,011
|
|
||||
U.S. Treasuries
|
4,006
|
|
463
|
|
3,543
|
|
—
|
|
||||
Total fixed maturities
|
57,834
|
|
463
|
|
53,576
|
|
3,795
|
|
||||
Fixed maturities, FVO
|
146
|
|
—
|
|
146
|
|
—
|
|
||||
Equity securities, trading [1]
|
11
|
|
11
|
|
—
|
|
—
|
|
||||
Equity securities, AFS
|
1,055
|
|
789
|
|
168
|
|
98
|
|
||||
Derivative assets
|
|
|
|
|
||||||||
Credit derivatives
|
8
|
|
—
|
|
8
|
|
—
|
|
||||
Equity derivatives
|
2
|
|
—
|
|
1
|
|
1
|
|
||||
Interest rate derivatives
|
2
|
|
—
|
|
2
|
|
—
|
|
||||
GMWB hedging instruments
|
45
|
|
—
|
|
—
|
|
45
|
|
||||
Macro hedge program
|
94
|
|
—
|
|
8
|
|
86
|
|
||||
Total derivative assets [2]
|
151
|
|
—
|
|
19
|
|
132
|
|
||||
Short-term investments
|
4,716
|
|
1,916
|
|
2,800
|
|
—
|
|
||||
Reinsurance recoverable for GMWB
|
57
|
|
—
|
|
—
|
|
57
|
|
||||
Modified coinsurance reinsurance contracts
|
58
|
|
—
|
|
58
|
|
—
|
|
||||
Separate account assets [3]
|
112,559
|
|
73,019
|
|
38,466
|
|
192
|
|
||||
Total assets accounted for at fair value on a recurring basis
|
$
|
176,587
|
|
$
|
76,198
|
|
$
|
95,233
|
|
$
|
4,274
|
|
Liabilities accounted for at fair value on a recurring basis
|
|
|
|
|
||||||||
Other policyholder funds and benefits payable
|
|
|
|
|
||||||||
GMWB embedded derivative
|
$
|
(134
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
(134
|
)
|
Equity linked notes
|
(37
|
)
|
—
|
|
—
|
|
(37
|
)
|
||||
Total other policyholder funds and benefits payable
|
(171
|
)
|
—
|
|
—
|
|
(171
|
)
|
||||
Derivative liabilities
|
|
|
|
|
||||||||
Credit derivatives
|
(6
|
)
|
—
|
|
(6
|
)
|
—
|
|
||||
Equity derivatives
|
38
|
|
—
|
|
37
|
|
1
|
|
||||
Foreign exchange derivatives
|
(267
|
)
|
—
|
|
(267
|
)
|
—
|
|
||||
Interest rate derivatives
|
(488
|
)
|
—
|
|
(462
|
)
|
(26
|
)
|
||||
GMWB hedging instruments
|
40
|
|
—
|
|
45
|
|
(5
|
)
|
||||
Macro hedge program
|
74
|
|
—
|
|
—
|
|
74
|
|
||||
Total derivative liabilities [4]
|
(609
|
)
|
—
|
|
(653
|
)
|
44
|
|
||||
Contingent consideration [5]
|
(27
|
)
|
—
|
|
—
|
|
(27
|
)
|
||||
Total liabilities accounted for at fair value on a recurring basis
|
$
|
(807
|
)
|
$
|
—
|
|
$
|
(653
|
)
|
$
|
(154
|
)
|
Assets and (Liabilities) Carried at Fair Value by Hierarchy Level as of December 31, 2016
|
||||||||||||
|
Total
|
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
|
Significant
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||
Assets accounted for at fair value on a recurring basis
|
|
|
|
|
||||||||
Fixed maturities, AFS
|
|
|
|
|
||||||||
ABS
|
$
|
2,382
|
|
$
|
—
|
|
$
|
2,300
|
|
$
|
82
|
|
CDOs
|
1,916
|
|
—
|
|
1,502
|
|
414
|
|
||||
CMBS
|
4,936
|
|
—
|
|
4,856
|
|
80
|
|
||||
Corporate
|
25,666
|
|
—
|
|
24,586
|
|
1,080
|
|
||||
Foreign government/government agencies
|
1,171
|
|
—
|
|
1,107
|
|
64
|
|
||||
Municipal bonds
|
11,486
|
|
—
|
|
11,368
|
|
118
|
|
||||
RMBS
|
4,767
|
|
—
|
|
2,795
|
|
1,972
|
|
||||
U.S. Treasuries
|
3,679
|
|
620
|
|
3,059
|
|
—
|
|
||||
Total fixed maturities
|
56,003
|
|
620
|
|
51,573
|
|
3,810
|
|
||||
Fixed maturities, FVO
|
293
|
|
1
|
|
281
|
|
11
|
|
||||
Equity securities, trading [1]
|
11
|
|
11
|
|
—
|
|
—
|
|
||||
Equity securities, AFS
|
1,097
|
|
821
|
|
177
|
|
99
|
|
||||
Derivative assets
|
|
|
|
|
||||||||
Credit derivatives
|
17
|
|
—
|
|
17
|
|
—
|
|
||||
Foreign exchange derivatives
|
27
|
|
—
|
|
27
|
|
—
|
|
||||
Interest rate derivatives
|
(427
|
)
|
—
|
|
(427
|
)
|
—
|
|
||||
GMWB hedging instruments
|
74
|
|
—
|
|
14
|
|
60
|
|
||||
Macro hedge program
|
128
|
|
—
|
|
8
|
|
120
|
|
||||
Other derivative contracts
|
1
|
|
—
|
|
—
|
|
1
|
|
||||
Total derivative assets [2]
|
(180
|
)
|
—
|
|
(361
|
)
|
181
|
|
||||
Short-term investments
|
3,244
|
|
878
|
|
2,366
|
|
—
|
|
||||
Reinsurance recoverable for GMWB
|
73
|
|
—
|
|
—
|
|
73
|
|
||||
Modified coinsurance reinsurance contracts
|
68
|
|
—
|
|
68
|
|
—
|
|
||||
Separate account assets [3]
|
111,634
|
|
71,606
|
|
38,856
|
|
201
|
|
||||
Total assets accounted for at fair value on a recurring basis
|
$
|
172,243
|
|
$
|
73,937
|
|
$
|
92,960
|
|
$
|
4,375
|
|
Liabilities accounted for at fair value on a recurring basis
|
|
|
|
|
||||||||
Other policyholder funds and benefits payable
|
|
|
|
|
||||||||
GMWB embedded derivative
|
$
|
(241
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
(241
|
)
|
Equity linked notes
|
(33
|
)
|
—
|
|
—
|
|
(33
|
)
|
||||
Total other policyholder funds and benefits payable
|
(274
|
)
|
—
|
|
—
|
|
(274
|
)
|
||||
Derivative liabilities
|
|
|
|
|
||||||||
Credit derivatives
|
(13
|
)
|
—
|
|
(13
|
)
|
—
|
|
||||
Equity derivatives
|
33
|
|
—
|
|
33
|
|
—
|
|
||||
Foreign exchange derivatives
|
(237
|
)
|
—
|
|
(237
|
)
|
—
|
|
||||
Interest rate derivatives
|
(542
|
)
|
—
|
|
(521
|
)
|
(21
|
)
|
||||
GMWB hedging instruments
|
20
|
|
—
|
|
(1
|
)
|
21
|
|
||||
Macro hedge program
|
50
|
|
—
|
|
3
|
|
47
|
|
||||
Total derivative liabilities [4]
|
(689
|
)
|
—
|
|
(736
|
)
|
47
|
|
||||
Contingent consideration [5]
|
(25
|
)
|
—
|
|
—
|
|
(25
|
)
|
||||
Total liabilities accounted for at fair value on a recurring basis
|
$
|
(988
|
)
|
$
|
—
|
|
$
|
(736
|
)
|
$
|
(252
|
)
|
[1]
|
Included in other investments on the Condensed Consolidated Balance Sheets.
|
[2]
|
Includes OTC and OTC-cleared derivative instruments in a net positive fair value position after consideration of the accrued interest and impact of collateral posting requirements which may be imposed by agreements, clearing house rules and applicable law. See footnote 4 to this table for derivative liabilities.
|
[3]
|
Approximately
$4.2 billion
and
$4.0 billion
of investment sales receivable, as of
June 30, 2017
, and
December 31, 2016
, respectively, are excluded from this disclosure requirement because they are trade receivables in the ordinary course of business where the carrying amount approximates fair value. Included in the total fair value amount are
$882
and
$1.0 billion
of investments, as of
June 30, 2017
and
December 31, 2016
, for which the fair value is estimated using the net asset value per unit as a practical expedient which are excluded from the disclosure requirement to classify amounts in the fair value hierarchy.
|
[4]
|
Includes OTC and OTC-cleared derivative instruments in a net negative fair value position (derivative liability) after consideration of the accrued interest and impact of collateral posting requirements, which may be imposed by agreements, clearing house rules and applicable law.
|
[5]
|
For additional information see the Contingent Consideration section below.
|
•
|
Quoted prices, unadjusted, for identical assets or liabilities in active markets, which are classified as Level 1.
|
•
|
Prices from third-party pricing services, which primarily utilize a combination of techniques. These services utilize recently reported trades of identical, similar, or benchmark securities making adjustments for market observable inputs available through the reporting date. If there are no recently reported trades, they may use a discounted cash flow technique to develop a price using expected cash flows based upon the anticipated future performance of the underlying collateral discounted at an estimated market rate. Both techniques develop prices that consider the time value of future cash flows and provide a margin for risk, including liquidity and credit risk. Most prices provided by third-party pricing services are classified as Level 2 because the inputs used in pricing the securities are observable. However, some securities that are less liquid or trade less actively are classified as Level 3. Additionally, certain long-dated securities, including certain municipal securities, foreign government/government agency securities, and bank loans, include benchmark interest rate or credit spread assumptions that are not observable in the marketplace and are thus classified as Level 3.
|
•
|
Internal matrix pricing, which is a valuation process internally developed for private placement securities for which the Company is unable to obtain a price from a third-party pricing service. Internal pricing matrices determine credit spreads that, when combined with risk-free rates, are applied to contractual cash flows to develop a price. The Company develops credit spreads using market based data for public securities adjusted for credit spread differentials between public and private securities, which are obtained from a survey of multiple private placement brokers. The market-based reference credit spread considers the issuer’s financial strength and term to maturity, using an
|
•
|
Independent broker quotes, which are typically non-binding and use inputs that can be difficult to corroborate with observable market based data. Brokers may use present value techniques using assumptions specific to the security types, or they may use recent transactions of similar securities. Due to the lack of transparency in the process that brokers use to develop prices, valuations that are based on independent broker quotes are classified as Level 3.
|
•
|
Review of daily price changes over specific thresholds and new trade comparison to third-party pricing services.
|
•
|
Daily comparison of OTC derivative market valuations to counterparty valuations.
|
•
|
Review of weekly price changes compared to published bond prices of a corporate bond index.
|
•
|
Monthly reviews of price changes over thresholds, stale prices, missing prices, and zero prices.
|
•
|
Monthly validation of prices to a second source for securities in most sectors and for certain derivatives.
|
Valuation Inputs Used in Levels 2 and 3 Measurements for Securities and Freestanding Derivatives
|
|||
Level 2
Primary Observable Inputs
|
Level 3
Primary Unobservable Inputs
|
||
Fixed Maturity Investments
|
|||
Structured securities (includes ABS, CDOs CMBS and RMBS)
|
|||
|
• Benchmark yields and spreads
• Monthly payment information
• Collateral performance, which varies by vintage year and includes delinquency rates, loss severity rates and refinancing assumptions
• Credit default swap indices
Other inputs for ABS and RMBS:
• Estimate of future principal prepayments, derived based on the characteristics of the underlying structure
• Prepayment speeds previously experienced at the interest rate levels projected for the collateral
|
|
• Independent broker quotes
• Credit spreads beyond observable curve
• Interest rates beyond observable curve
Other inputs for less liquid securities or those that trade less actively, including subprime RMBS:
• Estimated cash flows
• Credit spreads, which include illiquidity premium
• Constant prepayment rates
• Constant default rates
• Loss severity
|
Corporates
|
|||
|
• Benchmark yields and spreads
• Reported trades, bids, offers of the same or similar securities
• Issuer spreads and credit default swap curves
Other inputs for investment grade privately placed securities that utilize internal matrix pricing:
• Credit spreads for public securities of similar quality, maturity, and sector, adjusted for non-public nature
|
|
• Independent broker quotes
• Credit spreads beyond observable curve
• Interest rates beyond observable curve
Other inputs for below investment grade privately placed securities:
• Independent broker quotes
• Credit spreads for public securities of similar quality, maturity, and sector, adjusted for non-public nature
|
U.S Treasuries, Municipals, and Foreign government/government agencies
|
|||
|
• Benchmark yields and spreads
• Issuer credit default swap curves
• Political events in emerging market economies
• Municipal Securities Rulemaking Board reported trades and material event notices
• Issuer financial statements
|
|
• Independent broker quotes
• Credit spreads beyond observable curve
• Interest rates beyond observable curve
|
Equity Securities
|
|||
|
• Quoted prices in markets that are not active
|
|
• For privately traded equity securities, internal discounted cash flow models utilizing earnings multiples or other cash flow assumptions that are not observable; or they may be held at cost
|
Short Term Investments
|
|||
|
• Benchmark yields and spreads
• Reported trades, bids, offers
• Issuer spreads and credit default swap curves
• Material event notices and new issue money market rates
|
|
Not applicable
|
Derivatives
|
|||
Credit derivatives
|
|||
|
• Swap yield curve
• Credit default swap curves
|
|
• Independent broker quotes
• Yield curves beyond observable limits
|
Equity derivatives
|
|||
|
• Equity index levels
• Swap yield curve
|
|
• Independent broker quotes
• Equity volatility
|
Foreign exchange derivatives
|
|||
|
• Swap yield curve
• Currency spot and forward rates
• Cross currency basis curves
|
|
• Independent broker quotes
|
Interest rate derivatives
|
|||
|
• Swap yield curve
|
|
• Independent broker quotes
• Interest rate volatility
|
Significant Unobservable Inputs for Level 3 - Securities
|
|||||||||
Assets accounted for at fair value on a recurring basis
|
Fair
Value |
Predominant
Valuation Technique |
Significant
Unobservable Input
|
Minimum
|
Maximum
|
Weighted Average [1]
|
Impact of
Increase in Input on Fair Value [2] |
||
As of June 30, 2017
|
|||||||||
CMBS [3]
|
$
|
51
|
|
Discounted cash flows
|
Spread (encompasses prepayment, default risk and loss severity)
|
9 bps
|
1,816 bps
|
466 bps
|
Decrease
|
Corporate [4]
|
489
|
|
Discounted cash flows
|
Spread
|
108 bps
|
944 bps
|
303 bps
|
Decrease
|
|
Municipal [3]
|
70
|
|
Discounted cash flows
|
Spread
|
166 bps
|
222 bps
|
183 bps
|
Decrease
|
|
RMBS [3]
|
2,002
|
|
Discounted cash flows
|
Spread
|
40 bps
|
624 bps
|
126 bps
|
Decrease
|
|
|
|
|
Constant prepayment rate
|
—%
|
14%
|
5%
|
Decrease [5]
|
||
|
|
|
Constant default rate
|
2%
|
10%
|
5%
|
Decrease
|
||
|
|
|
Loss severity
|
—%
|
100%
|
71%
|
Decrease
|
||
As of December 31, 2016
|
|||||||||
CMBS [3]
|
$
|
52
|
|
Discounted cash flows
|
Spread (encompasses prepayment, default risk and loss severity)
|
10 bps
|
1,273 bps
|
366 bps
|
Decrease
|
Corporate [4]
|
510
|
|
Discounted cash flows
|
Spread
|
122 bps
|
1,302 bps
|
359 bps
|
Decrease
|
|
Municipal [3]
|
101
|
|
Discounted cash flows
|
Spread
|
135 bps
|
286 bps
|
221 bps
|
Decrease
|
|
RMBS [3]
|
1,963
|
|
Discounted cash flows
|
Spread
|
16 bps
|
1,830 bps
|
192 bps
|
Decrease
|
|
|
|
|
Constant prepayment rate
|
—%
|
20%
|
4%
|
Decrease [5]
|
||
|
|
|
Constant default rate
|
—%
|
11%
|
5%
|
Decrease
|
||
|
|
|
Loss severity
|
—%
|
100%
|
75%
|
Decrease
|
[1]
|
The weighted average is determined based on the fair value of the securities.
|
[2]
|
Conversely, the impact of a decrease in input would have the opposite impact to the fair value as that presented in the table.
|
[3]
|
Excludes securities for which the Company based fair value on broker quotations.
|
[4]
|
Excludes securities for which the Company bases fair value on broker quotations; however, included are broker priced lower-rated private placement securities for which the Company receives spread and yield information to corroborate the fair value.
|
[5]
|
Decrease for above market rate coupons and increase for below market rate coupons.
|
Significant Unobservable Inputs for Level 3 - Freestanding Derivatives
|
||||||||||
|
Fair
Value |
Predominant
Valuation Technique |
Significant Unobservable Input
|
Minimum
|
Maximum
|
Impact of
Increase in Input on Fair Value [1] |
||||
As of June 30, 2017
|
||||||||||
Interest rate derivatives
|
|
|
|
|
|
|
||||
Interest rate swaps
|
$
|
(29
|
)
|
Discounted cash flows
|
Swap curve beyond 30 years
|
3
|
%
|
3
|
%
|
Decrease
|
Interest rate swaptions [2]
|
3
|
|
Option model
|
Interest rate volatility
|
2
|
%
|
2
|
%
|
Increase
|
|
GMWB hedging instruments
|
|
|
|
|
|
|
||||
Equity variance swaps
|
(39
|
)
|
Option model
|
Equity volatility
|
16
|
%
|
20
|
%
|
Increase
|
|
Equity options
|
6
|
|
Option model
|
Equity volatility
|
26
|
%
|
28
|
%
|
Increase
|
|
Customized swaps
|
73
|
|
Discounted cash flows
|
Equity volatility
|
9
|
%
|
30
|
%
|
Increase
|
|
Macro hedge program [3]
|
|
|
|
|
|
|
||||
Equity options
|
171
|
|
Option model
|
Equity volatility
|
15
|
%
|
26
|
%
|
Increase
|
|
As of December 31, 2016
|
||||||||||
Interest rate derivatives
|
|
|
|
|
|
|
||||
Interest rate swaps
|
$
|
(29
|
)
|
Discounted cash flows
|
Swap curve beyond 30 years
|
3
|
%
|
3
|
%
|
Decrease
|
Interest rate swaptions [2]
|
8
|
|
Option model
|
Interest rate volatility
|
2
|
%
|
2
|
%
|
Increase
|
|
GMWB hedging instruments
|
|
|
|
|
|
|
||||
Equity variance swaps
|
(36
|
)
|
Option model
|
Equity volatility
|
20
|
%
|
23
|
%
|
Increase
|
|
Equity options
|
17
|
|
Option model
|
Equity volatility
|
27
|
%
|
30
|
%
|
Increase
|
|
Customized swaps
|
100
|
|
Discounted cash flows
|
Equity volatility
|
12
|
%
|
30
|
%
|
Increase
|
|
Macro hedge program [3]
|
|
|
|
|
|
|
||||
Equity options
|
188
|
|
Option model
|
Equity volatility
|
17
|
%
|
28
|
%
|
Increase
|
[1]
|
Conversely, the impact of a decrease in input would have the opposite impact to the fair value as that presented in the table. Changes are based on long positions, unless otherwise noted. Changes in fair value will be inversely impacted for short positions.
|
[2]
|
The swaptions presented are purchased options that have the right to enter into a pay-fixed swap.
|
[3]
|
Excludes derivatives for which the Company bases fair value on broker quotations.
|
GMWB Embedded Derivatives
|
The Company formerly offered certain variable annuity products with GMWB riders that provide the policyholder with a guaranteed remaining balance ("GRB") which is generally equal to premiums less withdrawals. If the policyholder’s account value is reduced to a specified level through a combination of market declines and withdrawals but the GRB still has value, the Company is obligated to continue to make annuity payments to the policyholder until the GRB is exhausted. When payments of the GRB are not life-contingent, the GMWB represents an embedded derivative carried at fair value reported in other policyholder funds and benefits payable in the Condensed Consolidated Balance Sheets with changes in fair value reported in net realized capital gains and losses.
|
Free-standing Customized Derivatives
|
The Company holds free-standing customized derivative contracts to provide protection from certain capital markets risks for the remaining term of specified blocks of non-reinsured GMWB riders. These customized derivatives are based on policyholder behavior assumptions specified at the inception of the derivative contracts. The Company retains the risk for differences between assumed and actual policyholder behavior and between the performance of the actively managed funds underlying the separate accounts and their respective indices. These derivatives are reported in the Condensed Consolidated Balance Sheets within other investments or other liabilities, as appropriate, after considering the impact of master netting agreements.
|
GMWB Reinsurance Derivative
|
The Company has reinsurance arrangements in place to transfer a portion of its risk of loss due to GMWB. These arrangements are recognized as derivatives carried at fair value and reported in reinsurance recoverables in the Condensed Consolidated Balance Sheets. Changes in the fair value of the reinsurance agreements are reported in net realized capital gains and losses.
|
Valuation Inputs Used in Levels 2 and 3 Measurements for GMWB Embedded, Customized and Reinsurance Derivatives
|
|||
Level 2
Primary Observable Inputs |
Level 3
Primary Unobservable Inputs |
||
|
• Risk-free rates as represented by the Eurodollar futures, LIBOR deposits and swap rates to derive forward curve rates
• Correlations of 10 years of observed historical returns across underlying well-known market indices
• Correlations of historical index returns compared to separate account fund returns
• Equity index levels
|
|
• Market implied equity volatility assumptions
Assumptions about policyholder behavior, including: • Withdrawal utilization
• Withdrawal rates
• Lapse rates
• Reset elections
|
[1]
|
Conversely, the impact of a decrease in input would have the opposite impact to the fair value as that presented in the table.
|
[2]
|
Range represents assumed cumulative percentages of policyholders taking withdrawals.
|
[3]
|
Range represents assumed cumulative annual amount withdrawn by policyholders.
|
[4]
|
Range represents assumed annual percentages of full surrender of the underlying variable annuity contracts across all policy durations for in force business.
|
[5]
|
Range represents assumed cumulative percentages of policyholders that would elect to reset their guaranteed benefit base.
|
[6]
|
Range represents implied market volatilities for equity indices based on multiple pricing sources.
|
Fair Value Roll-forwards for Financial Instruments Classified as Level 3 for the Three Months Ended June 30, 2017
|
||||||||||||||||||||||||||||
|
Total realized/unrealized gains (losses)
|
|
|
|
|
|
|
|||||||||||||||||||||
|
|
Fair value as of March 31, 2017
|
Included in net income [1] [2] [6]
|
Included in OCI [3]
|
Purchases [8]
|
Settlements
|
Sales
|
Transfers into Level 3 [4]
|
Transfers out of Level 3 [4]
|
Fair value as of June 30, 2017
|
||||||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Fixed Maturities, AFS
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
ABS
|
$
|
125
|
|
$
|
—
|
|
$
|
—
|
|
$
|
25
|
|
$
|
(1
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
(53
|
)
|
$
|
96
|
|
|
CDOs
|
319
|
|
—
|
|
(5
|
)
|
300
|
|
(207
|
)
|
—
|
|
—
|
|
(68
|
)
|
339
|
|
|||||||||
|
CMBS
|
117
|
|
—
|
|
1
|
|
19
|
|
(3
|
)
|
—
|
|
—
|
|
(36
|
)
|
98
|
|
|||||||||
|
Corporate
|
1,078
|
|
(12
|
)
|
14
|
|
46
|
|
(4
|
)
|
(30
|
)
|
52
|
|
(8
|
)
|
1,136
|
|
|||||||||
|
Foreign Govt./Govt. Agencies
|
66
|
|
—
|
|
—
|
|
6
|
|
(1
|
)
|
(2
|
)
|
—
|
|
(40
|
)
|
29
|
|
|||||||||
|
Municipal
|
117
|
|
4
|
|
(1
|
)
|
—
|
|
—
|
|
(34
|
)
|
—
|
|
—
|
|
86
|
|
|||||||||
|
RMBS
|
2,048
|
|
—
|
|
27
|
|
50
|
|
(114
|
)
|
—
|
|
—
|
|
—
|
|
2,011
|
|
|||||||||
Total Fixed Maturities, AFS
|
3,870
|
|
(8
|
)
|
36
|
|
446
|
|
(330
|
)
|
(66
|
)
|
52
|
|
(205
|
)
|
3,795
|
|
||||||||||
Equity Securities, AFS
|
99
|
|
—
|
|
(1
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
98
|
|
||||||||||
Freestanding Derivatives, net [5]
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Equity
|
4
|
|
(2
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2
|
|
|||||||||
|
Interest rate
|
(24
|
)
|
(2
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(26
|
)
|
|||||||||
|
GMWB hedging instruments
|
46
|
|
(6
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
40
|
|
|||||||||
|
Macro hedge program
|
159
|
|
1
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
160
|
|
|||||||||
|
Other contracts
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||||||
Total Freestanding Derivatives, net [5]
|
185
|
|
(9
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
176
|
|
||||||||||
Reinsurance Recoverable for GMWB
|
60
|
|
(7
|
)
|
—
|
|
—
|
|
4
|
|
—
|
|
—
|
|
—
|
|
57
|
|
||||||||||
Separate Accounts
|
277
|
|
2
|
|
—
|
|
13
|
|
(2
|
)
|
(34
|
)
|
7
|
|
(71
|
)
|
192
|
|
||||||||||
Total Assets
|
$
|
4,491
|
|
$
|
(22
|
)
|
$
|
35
|
|
$
|
459
|
|
$
|
(328
|
)
|
$
|
(100
|
)
|
$
|
59
|
|
$
|
(276
|
)
|
$
|
4,318
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Other Policyholder Funds and Benefits Payable
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Guaranteed Withdrawal Benefits
|
$
|
(157
|
)
|
$
|
40
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(17
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(134
|
)
|
|
Equity Linked Notes
|
(36
|
)
|
(1
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(37
|
)
|
|||||||||
Total Other Policyholder Funds and Benefits Payable
|
(193
|
)
|
39
|
|
—
|
|
—
|
|
(17
|
)
|
—
|
|
—
|
|
—
|
|
(171
|
)
|
||||||||||
Contingent Consideration [7]
|
(26
|
)
|
(1
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(27
|
)
|
||||||||||
Total Liabilities
|
$
|
(219
|
)
|
$
|
38
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(17
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(198
|
)
|
Fair Value Roll-forwards for Financial Instruments Classified as Level 3 for the Six Months Ended June 30, 2017
|
||||||||||||||||||||||||||||
|
Total realized/unrealized gains (losses)
|
|
|
|
|
|
|
|||||||||||||||||||||
|
|
Fair value as of January 1, 2017
|
Included in net income [1] [2] [6]
|
Included in OCI [3]
|
Purchases [8]
|
Settlements
|
Sales
|
Transfers into Level 3 [4]
|
Transfers out of Level 3 [4]
|
Fair value as of June 30, 2017
|
||||||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Fixed Maturities, AFS
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
ABS
|
$
|
82
|
|
$
|
—
|
|
$
|
—
|
|
$
|
70
|
|
$
|
(6
|
)
|
$
|
—
|
|
$
|
26
|
|
$
|
(76
|
)
|
$
|
96
|
|
|
CDOs
|
414
|
|
—
|
|
(1
|
)
|
300
|
|
(208
|
)
|
—
|
|
—
|
|
(166
|
)
|
339
|
|
|||||||||
|
CMBS
|
80
|
|
(1
|
)
|
1
|
|
75
|
|
(6
|
)
|
—
|
|
—
|
|
(51
|
)
|
98
|
|
|||||||||
|
Corporate
|
1,080
|
|
(6
|
)
|
30
|
|
215
|
|
(40
|
)
|
(190
|
)
|
92
|
|
(45
|
)
|
1,136
|
|
|||||||||
|
Foreign Govt./Govt. Agencies
|
64
|
|
—
|
|
3
|
|
6
|
|
(2
|
)
|
(2
|
)
|
—
|
|
(40
|
)
|
29
|
|
|||||||||
|
Municipal
|
118
|
|
4
|
|
4
|
|
—
|
|
—
|
|
(40
|
)
|
—
|
|
—
|
|
86
|
|
|||||||||
|
RMBS
|
1,972
|
|
—
|
|
33
|
|
223
|
|
(210
|
)
|
(7
|
)
|
—
|
|
—
|
|
2,011
|
|
|||||||||
Total Fixed Maturities, AFS
|
3,810
|
|
(3
|
)
|
70
|
|
889
|
|
(472
|
)
|
(239
|
)
|
118
|
|
(378
|
)
|
3,795
|
|
||||||||||
Fixed Maturities, FVO
|
11
|
|
—
|
|
—
|
|
4
|
|
(2
|
)
|
(13
|
)
|
—
|
|
—
|
|
—
|
|
||||||||||
Equity Securities, AFS
|
99
|
|
—
|
|
(5
|
)
|
4
|
|
—
|
|
—
|
|
—
|
|
—
|
|
98
|
|
||||||||||
Freestanding Derivatives, net [5]
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Equity
|
—
|
|
(3
|
)
|
—
|
|
5
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2
|
|
|||||||||
|
Interest rate
|
(21
|
)
|
(5
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(26
|
)
|
|||||||||
|
GMWB hedging instruments
|
81
|
|
(41
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
40
|
|
|||||||||
|
Macro hedge program
|
167
|
|
(7
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
160
|
|
|||||||||
|
Other contracts
|
1
|
|
(1
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||||||
Total Freestanding Derivatives, net [5]
|
228
|
|
(57
|
)
|
—
|
|
5
|
|
—
|
|
—
|
|
—
|
|
—
|
|
176
|
|
||||||||||
Reinsurance Recoverable for GMWB
|
73
|
|
(23
|
)
|
—
|
|
—
|
|
7
|
|
—
|
|
—
|
|
—
|
|
57
|
|
||||||||||
Separate Accounts
|
201
|
|
3
|
|
2
|
|
111
|
|
(7
|
)
|
(42
|
)
|
10
|
|
(86
|
)
|
192
|
|
||||||||||
Total Assets
|
$
|
4,422
|
|
$
|
(80
|
)
|
$
|
67
|
|
$
|
1,013
|
|
$
|
(474
|
)
|
$
|
(294
|
)
|
$
|
128
|
|
$
|
(464
|
)
|
$
|
4,318
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Other Policyholder Funds and Benefits Payable
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Guaranteed Withdrawal Benefits
|
$
|
(241
|
)
|
$
|
140
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(33
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(134
|
)
|
|
Equity Linked Notes
|
(33
|
)
|
(4
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(37
|
)
|
|||||||||
Total Other Policyholder Funds and Benefits Payable
|
(274
|
)
|
136
|
|
—
|
|
—
|
|
(33
|
)
|
—
|
|
—
|
|
—
|
|
(171
|
)
|
||||||||||
Contingent Consideration [7]
|
(25
|
)
|
(2
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(27
|
)
|
||||||||||
Total Liabilities
|
$
|
(299
|
)
|
$
|
134
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(33
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(198
|
)
|
Fair Value Roll-forwards for Financial Instruments Classified as Level 3 for the Three Months Ended June 30, 2016
|
||||||||||||||||||||||||||||
|
Total realized/unrealized gains (losses)
|
|
|
|
|
|
|
|||||||||||||||||||||
|
|
Fair value as of March 31, 2016
|
Included in net income [1] [2] [6]
|
Included in OCI [3]
|
Purchases [8]
|
Settlements
|
Sales
|
Transfers into Level 3 [4]
|
Transfers out of Level 3 [4]
|
Fair value as of June 30, 2016
|
||||||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Fixed Maturities, AFS
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
ABS
|
$
|
32
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(4
|
)
|
$
|
—
|
|
$
|
13
|
|
$
|
—
|
|
$
|
41
|
|
|
CDOs
|
542
|
|
(1
|
)
|
(2
|
)
|
—
|
|
(61
|
)
|
—
|
|
—
|
|
—
|
|
478
|
|
|||||||||
|
CMBS
|
134
|
|
—
|
|
5
|
|
10
|
|
(9
|
)
|
(3
|
)
|
1
|
|
(59
|
)
|
79
|
|
|||||||||
|
Corporate
|
834
|
|
(1
|
)
|
19
|
|
37
|
|
(50
|
)
|
(66
|
)
|
455
|
|
(92
|
)
|
1,136
|
|
|||||||||
|
Foreign Govt./Govt. Agencies
|
76
|
|
1
|
|
4
|
|
1
|
|
(1
|
)
|
(9
|
)
|
—
|
|
—
|
|
72
|
|
|||||||||
|
Municipal
|
50
|
|
—
|
|
4
|
|
20
|
|
—
|
|
—
|
|
16
|
|
—
|
|
90
|
|
|||||||||
|
RMBS
|
1,886
|
|
—
|
|
10
|
|
97
|
|
(101
|
)
|
—
|
|
3
|
|
(22
|
)
|
1,873
|
|
|||||||||
Total Fixed Maturities, AFS
|
3,554
|
|
(1
|
)
|
40
|
|
165
|
|
(226
|
)
|
(78
|
)
|
488
|
|
(173
|
)
|
3,769
|
|
||||||||||
Fixed Maturities, FVO
|
14
|
|
1
|
|
—
|
|
1
|
|
(1
|
)
|
(3
|
)
|
—
|
|
(6
|
)
|
6
|
|
||||||||||
Equity Securities, AFS
|
92
|
|
1
|
|
5
|
|
2
|
|
—
|
|
(3
|
)
|
—
|
|
—
|
|
97
|
|
||||||||||
Freestanding Derivatives, net [5]
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Equity
|
5
|
|
(4
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1
|
|
|||||||||
|
Interest rate
|
(28
|
)
|
(4
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(32
|
)
|
|||||||||
|
GMWB hedging instruments
|
144
|
|
15
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
6
|
|
165
|
|
|||||||||
|
Macro hedge program
|
145
|
|
(4
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
141
|
|
|||||||||
|
Other contracts
|
5
|
|
(1
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
4
|
|
|||||||||
Total Freestanding Derivatives, net [5]
|
271
|
|
2
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
6
|
|
279
|
|
||||||||||
Reinsurance Recoverable for GMWB
|
99
|
|
3
|
|
—
|
|
—
|
|
4
|
|
—
|
|
—
|
|
—
|
|
106
|
|
||||||||||
Separate Accounts
|
154
|
|
—
|
|
3
|
|
22
|
|
(3
|
)
|
(6
|
)
|
3
|
|
(2
|
)
|
171
|
|
||||||||||
Total Assets
|
$
|
4,184
|
|
$
|
6
|
|
$
|
48
|
|
$
|
190
|
|
$
|
(226
|
)
|
$
|
(90
|
)
|
$
|
491
|
|
$
|
(175
|
)
|
$
|
4,428
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Other Policyholder Funds and Benefits Payable
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Guaranteed Withdrawal Benefits
|
$
|
(361
|
)
|
$
|
(35
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
(16
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(412
|
)
|
|
Equity Linked Notes
|
(25
|
)
|
(3
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(28
|
)
|
|||||||||
Total Other Policyholder Funds and Benefits Payable
|
(386
|
)
|
(38
|
)
|
—
|
|
—
|
|
(16
|
)
|
—
|
|
—
|
|
—
|
|
(440
|
)
|
||||||||||
Total Liabilities
|
$
|
(386
|
)
|
$
|
(38
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
(16
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(440
|
)
|
Fair Value Roll-forwards for Financial Instruments Classified as Level 3 for the Six Months Ended June 30, 2016
|
||||||||||||||||||||||||||||
|
Total realized/unrealized gains (losses)
|
|
|
|
|
|
|
|||||||||||||||||||||
|
|
Fair value as of January 1, 2016
|
Included in net income [1] [2] [6]
|
Included in OCI [3]
|
Purchases [8]
|
Settlements
|
Sales
|
Transfers into Level 3 [4]
|
Transfers out of Level 3 [4]
|
Fair value as of June 30, 2016
|
||||||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Fixed Maturities, AFS
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
ABS
|
$
|
37
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(7
|
)
|
$
|
—
|
|
$
|
18
|
|
$
|
(7
|
)
|
$
|
41
|
|
|
CDOs
|
541
|
|
(1
|
)
|
(2
|
)
|
—
|
|
(60
|
)
|
—
|
|
—
|
|
—
|
|
478
|
|
|||||||||
|
CMBS
|
150
|
|
(1
|
)
|
(3
|
)
|
50
|
|
(18
|
)
|
(3
|
)
|
1
|
|
(97
|
)
|
79
|
|
|||||||||
|
Corporate
|
854
|
|
(14
|
)
|
12
|
|
67
|
|
(55
|
)
|
(91
|
)
|
513
|
|
(150
|
)
|
1,136
|
|
|||||||||
|
Foreign Govt./Govt. Agencies
|
60
|
|
1
|
|
9
|
|
15
|
|
(2
|
)
|
(11
|
)
|
—
|
|
—
|
|
72
|
|
|||||||||
|
Municipal
|
49
|
|
—
|
|
5
|
|
20
|
|
—
|
|
—
|
|
16
|
|
—
|
|
90
|
|
|||||||||
|
RMBS
|
1,622
|
|
—
|
|
(4
|
)
|
430
|
|
(158
|
)
|
—
|
|
5
|
|
(22
|
)
|
1,873
|
|
|||||||||
Total Fixed Maturities, AFS
|
3,313
|
|
(15
|
)
|
17
|
|
582
|
|
(300
|
)
|
(105
|
)
|
553
|
|
(276
|
)
|
3,769
|
|
||||||||||
Fixed Maturities, FVO
|
16
|
|
(1
|
)
|
—
|
|
6
|
|
(2
|
)
|
(3
|
)
|
—
|
|
(10
|
)
|
6
|
|
||||||||||
Equity Securities, AFS
|
93
|
|
—
|
|
7
|
|
2
|
|
—
|
|
(5
|
)
|
—
|
|
—
|
|
97
|
|
||||||||||
Freestanding Derivatives, net [5]
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Equity
|
—
|
|
(15
|
)
|
—
|
|
16
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1
|
|
|||||||||
|
Interest rate
|
(22
|
)
|
(10
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(32
|
)
|
|||||||||
|
GMWB hedging instruments
|
135
|
|
24
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
6
|
|
165
|
|
|||||||||
|
Macro hedge program
|
147
|
|
(4
|
)
|
—
|
|
—
|
|
(2
|
)
|
—
|
|
—
|
|
—
|
|
141
|
|
|||||||||
|
Other contracts
|
7
|
|
(3
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
4
|
|
|||||||||
Total Freestanding Derivatives, net [5]
|
267
|
|
(8
|
)
|
—
|
|
16
|
|
(2
|
)
|
—
|
|
—
|
|
6
|
|
279
|
|
||||||||||
Reinsurance Recoverable for GMWB
|
83
|
|
16
|
|
—
|
|
—
|
|
7
|
|
—
|
|
—
|
|
—
|
|
106
|
|
||||||||||
Separate Accounts
|
139
|
|
—
|
|
7
|
|
61
|
|
(9
|
)
|
(16
|
)
|
6
|
|
(17
|
)
|
171
|
|
||||||||||
Total Assets
|
$
|
3,911
|
|
$
|
(8
|
)
|
$
|
31
|
|
$
|
667
|
|
$
|
(306
|
)
|
$
|
(129
|
)
|
$
|
559
|
|
$
|
(297
|
)
|
$
|
4,428
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Other Policyholder Funds and Benefits Payable
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Guaranteed Withdrawal Benefits
|
$
|
(262
|
)
|
$
|
(117
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
(33
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(412
|
)
|
|
Equity Linked Notes
|
(26
|
)
|
(2
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(28
|
)
|
|||||||||
Total Other Policyholder Funds and Benefits Payable
|
(288
|
)
|
(119
|
)
|
—
|
|
—
|
|
(33
|
)
|
—
|
|
—
|
|
—
|
|
(440
|
)
|
||||||||||
Total Liabilities
|
$
|
(288
|
)
|
$
|
(119
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
(33
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(440
|
)
|
[1]
|
The Company classifies realized and unrealized gains (losses) on GMWB reinsurance derivatives and GMWB embedded derivatives as unrealized gains (losses) for purposes of disclosure in this table because it is impracticable to track on a contract-by-contract basis the realized gains (losses) for these derivatives and embedded derivatives.
|
[2]
|
Amounts in these rows are generally reported in net realized capital gains (losses). The realized/unrealized gains (losses) included in net income for separate account assets are offset by an equal amount for separate account liabilities, which results in a net zero impact on net income for the Company. All amounts are before income taxes and amortization of DAC.
|
[3]
|
All amounts are before income taxes and amortization of DAC.
|
[4]
|
Transfers in and/or (out) of Level 3 are primarily attributable to the availability of market observable information and the re-evaluation of the observability of pricing inputs.
|
[5]
|
Derivative instruments are reported in this table on a net basis for asset (liability) positions and reported in the Condensed Consolidated Balance Sheets in other investments and other liabilities.
|
[6]
|
Includes both market and non-market impacts in deriving realized and unrealized gains (losses).
|
[7]
|
For additional information, see the Contingent Consideration section of Note
5
-
Fair Value Measurements
of Notes to Condensed Consolidated Financial Statements.
|
[8]
|
Includes issuance of contingent consideration associated with the Lattice acquisition, see Note
2
-
Business Disposition
of Notes to Condensed Consolidated Financial Statements for additional discussion.
|
Changes in Unrealized Gains (Losses) Included in Net Income for Financial Instruments Classified as Level 3 Still Held at End of Period
|
|||||||||||||
|
|
Three months ended June 30,
|
Six months ended June 30,
|
||||||||||
|
|
2017 [1] [2]
|
2016 [1] [2]
|
2017 [1] [2]
|
2016 [1] [2]
|
||||||||
Assets
|
|
|
|
|
|||||||||
Fixed Maturities, AFS
|
|
|
|
|
|||||||||
|
CMBS
|
$
|
—
|
|
$
|
—
|
|
$
|
(1
|
)
|
$
|
(1
|
)
|
|
Corporate
|
(12
|
)
|
(1
|
)
|
(12
|
)
|
(1
|
)
|
||||
Total Fixed Maturities, AFS
|
(12
|
)
|
(1
|
)
|
(13
|
)
|
(2
|
)
|
|||||
Fixed Maturities, FVO
|
—
|
|
—
|
|
—
|
|
(1
|
)
|
|||||
Freestanding Derivatives, net
|
|
|
|
|
|||||||||
|
Equity
|
(2
|
)
|
(4
|
)
|
(2
|
)
|
(15
|
)
|
||||
|
Interest rate
|
(2
|
)
|
(4
|
)
|
(2
|
)
|
(10
|
)
|
||||
|
GMWB hedging instruments
|
(6
|
)
|
15
|
|
(42
|
)
|
24
|
|
||||
|
Macro hedge program
|
2
|
|
(4
|
)
|
(6
|
)
|
(4
|
)
|
||||
|
Other Contracts
|
—
|
|
(1
|
)
|
—
|
|
(3
|
)
|
||||
Total Freestanding Derivatives, net
|
(8
|
)
|
2
|
|
(52
|
)
|
(8
|
)
|
|||||
Reinsurance Recoverable for GMWB
|
(7
|
)
|
3
|
|
(23
|
)
|
16
|
|
|||||
Separate Accounts
|
—
|
|
—
|
|
1
|
|
—
|
|
|||||
Total Assets
|
$
|
(27
|
)
|
$
|
4
|
|
$
|
(87
|
)
|
$
|
5
|
|
|
Liabilities
|
|
|
|
|
|||||||||
Other Policyholder Funds and Benefits Payable
|
|
|
|
|
|||||||||
|
Guaranteed Withdrawal Benefits
|
$
|
40
|
|
$
|
(35
|
)
|
$
|
140
|
|
$
|
(117
|
)
|
|
Equity Linked Notes
|
(1
|
)
|
(3
|
)
|
(4
|
)
|
(2
|
)
|
||||
Total Other Policyholder Funds and Benefits Payable
|
39
|
|
(38
|
)
|
136
|
|
(119
|
)
|
|||||
Contingent Consideration [3]
|
(1
|
)
|
—
|
|
(2
|
)
|
—
|
|
|||||
Total Liabilities
|
$
|
38
|
|
$
|
(38
|
)
|
$
|
134
|
|
$
|
(119
|
)
|
[1]
|
All amounts in these rows are reported in net realized capital gains (losses). The realized/unrealized gains (losses) included in net income for separate account assets are offset by an equal amount for separate account liabilities, which results in a net zero impact on net income for the Company. All amounts are before income taxes and amortization of DAC.
|
[2]
|
Amounts presented are for Level 3 only and therefore may not agree to other disclosures included herein.
|
[3]
|
For additional information, see the Contingent Consideration section of Note
5
-
Fair Value Measurements
of Notes to Condensed Consolidated Financial Statements.
|
Changes in Fair Value of Assets using Fair Value Option
|
|||||||||||||
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
|
2017
|
2016
|
|
2017
|
2016
|
||||||||
Assets
|
|
|
|
|
|
||||||||
Fixed maturities, FVO
|
|
|
|
|
|
||||||||
Corporate
|
$
|
—
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
$
|
—
|
|
Foreign government
|
—
|
|
—
|
|
|
—
|
|
(1
|
)
|
||||
RMBS
|
—
|
|
4
|
|
|
1
|
|
5
|
|
||||
Total fixed maturities, FVO
|
$
|
—
|
|
$
|
4
|
|
|
$
|
—
|
|
$
|
4
|
|
Equity, FVO
|
3
|
|
—
|
|
|
2
|
|
(34
|
)
|
||||
Total realized capital gains (losses)
|
$
|
3
|
|
$
|
4
|
|
|
$
|
2
|
|
$
|
(30
|
)
|
[1]
|
Excludes guarantees on variable annuities, group accident and health and universal life insurance contracts, including corporate owned life insurance.
|
[2]
|
Included in long-term debt in the Condensed Consolidated Balance Sheets, except for current maturities, which are included in short-term debt.
|
[3]
|
Excludes amounts carried at fair value and included in preceding disclosures.
|
[4]
|
Included in other liabilities in the Condensed Consolidated Balance Sheets.
|
Net Realized Capital Gains (Losses)
|
||||||||||||
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
||||||||||
(Before tax)
|
2017
|
2016
|
2017
|
2016
|
||||||||
Gross gains on sales
|
$
|
140
|
|
$
|
124
|
|
$
|
252
|
|
$
|
214
|
|
Gross losses on sales
|
(31
|
)
|
(25
|
)
|
(106
|
)
|
(133
|
)
|
||||
Net OTTI losses recognized in earnings
|
(14
|
)
|
(7
|
)
|
(15
|
)
|
(30
|
)
|
||||
Valuation allowances on mortgage loans
|
2
|
|
—
|
|
2
|
|
—
|
|
||||
Results of variable annuity hedge program
|
|
|
|
|
|
|||||||
GMWB derivatives, net
|
20
|
|
3
|
|
38
|
|
(14
|
)
|
||||
Macro hedge program
|
(38
|
)
|
(20
|
)
|
(124
|
)
|
(34
|
)
|
||||
Total results of variable annuity hedge program
|
(18
|
)
|
(17
|
)
|
(86
|
)
|
(48
|
)
|
||||
Transactional foreign currency revaluation
|
13
|
|
(87
|
)
|
—
|
|
(131
|
)
|
||||
Non-qualifying foreign currency derivatives
|
(17
|
)
|
82
|
|
(6
|
)
|
121
|
|
||||
Other, net [1]
|
—
|
|
(17
|
)
|
14
|
|
(95
|
)
|
||||
Net realized capital gains (losses)
|
$
|
75
|
|
$
|
53
|
|
$
|
55
|
|
$
|
(102
|
)
|
[1]
|
Includes non-qualifying derivatives, excluding variable annuity hedge program and foreign currency derivatives, of
$(5)
and
$(23)
, respectively for the three months ended
June 30, 2017
and
2016
. For the six months ended
June 30, 2017
and
2016
, the non-qualifying derivatives, excluding variable annuity hedge program and foreign currency derivatives were
$5
and
$(60)
, respectively.
|
Impairments in Earnings by Type
|
||||||||||||
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
||||||||||
|
2017
|
2016
|
2017
|
2016
|
||||||||
Credit impairments
|
$
|
13
|
|
$
|
5
|
|
$
|
14
|
|
$
|
23
|
|
Intent-to-sell impairments
|
—
|
|
1
|
|
—
|
|
3
|
|
||||
Impairments on equity securities
|
1
|
|
1
|
|
1
|
|
4
|
|
||||
Total impairments
|
$
|
14
|
|
$
|
7
|
|
$
|
15
|
|
$
|
30
|
|
Cumulative Credit Impairments
|
||||||||||||
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
||||||||||
(Before tax)
|
2017
|
2016
|
2017
|
2016
|
||||||||
Balance as of beginning of period
|
$
|
(260
|
)
|
$
|
(336
|
)
|
$
|
(280
|
)
|
$
|
(324
|
)
|
Additions for credit impairments recognized on [1]:
|
|
|
|
|
||||||||
Securities not previously impaired
|
—
|
|
(4
|
)
|
(1
|
)
|
(21
|
)
|
||||
Securities previously impaired
|
(13
|
)
|
(1
|
)
|
(13
|
)
|
(2
|
)
|
||||
Reductions for credit impairments previously recognized on:
|
|
|
|
|
||||||||
Securities that matured or were sold during the period
|
29
|
|
35
|
|
41
|
|
36
|
|
||||
Securities due to an increase in expected cash flows
|
8
|
|
13
|
|
17
|
|
18
|
|
||||
Balance as of end of period
|
$
|
(236
|
)
|
$
|
(293
|
)
|
$
|
(236
|
)
|
$
|
(293
|
)
|
[1]
|
These additions are included in the net OTTI losses recognized in earnings in the Condensed Consolidated Statements of Operations.
|
AFS Securities by Type
|
||||||||||||||||||||||||||||||
|
June 30, 2017
|
December 31, 2016
|
||||||||||||||||||||||||||||
|
Cost or
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair
Value
|
Non-Credit
OTTI [1]
|
Cost or
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair
Value
|
Non-Credit
OTTI [1]
|
||||||||||||||||||||
ABS
|
$
|
2,350
|
|
$
|
21
|
|
$
|
(17
|
)
|
$
|
2,354
|
|
$
|
—
|
|
$
|
2,396
|
|
$
|
17
|
|
$
|
(31
|
)
|
$
|
2,382
|
|
$
|
—
|
|
CDOs
|
2,427
|
|
33
|
|
(3
|
)
|
2,457
|
|
—
|
|
1,853
|
|
67
|
|
(4
|
)
|
1,916
|
|
—
|
|
||||||||||
CMBS
|
5,085
|
|
127
|
|
(39
|
)
|
5,173
|
|
(7
|
)
|
4,907
|
|
97
|
|
(68
|
)
|
4,936
|
|
(6
|
)
|
||||||||||
Corporate
|
24,307
|
|
1,842
|
|
(105
|
)
|
26,044
|
|
—
|
|
24,380
|
|
1,510
|
|
(224
|
)
|
25,666
|
|
—
|
|
||||||||||
Foreign govt./govt. agencies
|
1,249
|
|
56
|
|
(8
|
)
|
1,297
|
|
—
|
|
1,164
|
|
33
|
|
(26
|
)
|
1,171
|
|
—
|
|
||||||||||
Municipal
|
11,461
|
|
852
|
|
(29
|
)
|
12,284
|
|
—
|
|
10,825
|
|
732
|
|
(71
|
)
|
11,486
|
|
—
|
|
||||||||||
RMBS
|
4,131
|
|
95
|
|
(7
|
)
|
4,219
|
|
—
|
|
4,738
|
|
66
|
|
(37
|
)
|
4,767
|
|
—
|
|
||||||||||
U.S. Treasuries
|
3,790
|
|
235
|
|
(19
|
)
|
4,006
|
|
—
|
|
3,542
|
|
182
|
|
(45
|
)
|
3,679
|
|
—
|
|
||||||||||
Total fixed maturities, AFS
|
$
|
54,800
|
|
$
|
3,261
|
|
$
|
(227
|
)
|
$
|
57,834
|
|
$
|
(7
|
)
|
$
|
53,805
|
|
$
|
2,704
|
|
$
|
(506
|
)
|
$
|
56,003
|
|
$
|
(6
|
)
|
Equity securities, AFS
|
964
|
|
111
|
|
(20
|
)
|
1,055
|
|
—
|
|
1,020
|
|
96
|
|
(19
|
)
|
1,097
|
|
—
|
|
||||||||||
Total AFS securities
|
$
|
55,764
|
|
$
|
3,372
|
|
$
|
(247
|
)
|
$
|
58,889
|
|
$
|
(7
|
)
|
$
|
54,825
|
|
$
|
2,800
|
|
$
|
(525
|
)
|
$
|
57,100
|
|
$
|
(6
|
)
|
[1]
|
Represents the amount of cumulative non-credit OTTI losses recognized in OCI on securities that also had credit impairments. These losses are included in gross unrealized losses as of
June 30, 2017
, and
December 31, 2016
.
|
Fixed maturities, AFS, by Contractual Maturity Year
|
||||||||||||
|
June 30, 2017
|
December 31, 2016
|
||||||||||
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
||||||||
One year or less
|
$
|
2,113
|
|
$
|
2,132
|
|
$
|
1,896
|
|
$
|
1,912
|
|
Over one year through five years
|
8,954
|
|
9,224
|
|
9,015
|
|
9,289
|
|
||||
Over five years through ten years
|
9,282
|
|
9,627
|
|
9,038
|
|
9,245
|
|
||||
Over ten years
|
20,458
|
|
22,648
|
|
19,962
|
|
21,556
|
|
||||
Subtotal
|
40,807
|
|
43,631
|
|
39,911
|
|
42,002
|
|
||||
Mortgage-backed and asset-backed securities
|
13,993
|
|
14,203
|
|
13,894
|
|
14,001
|
|
||||
Total fixed maturities, AFS
|
$
|
54,800
|
|
$
|
57,834
|
|
$
|
53,805
|
|
$
|
56,003
|
|
Unrealized Loss Aging for AFS Securities by Type and Length of Time as of June 30, 2017
|
|||||||||||||||||||||||||||
|
Less Than 12 Months
|
12 Months or More
|
Total
|
||||||||||||||||||||||||
|
Amortized Cost
|
Fair Value
|
Unrealized Losses
|
Amortized Cost
|
Fair Value
|
Unrealized Losses
|
Amortized Cost
|
Fair Value
|
Unrealized Losses
|
||||||||||||||||||
ABS
|
$
|
637
|
|
$
|
636
|
|
$
|
(1
|
)
|
$
|
229
|
|
$
|
213
|
|
$
|
(16
|
)
|
$
|
866
|
|
$
|
849
|
|
$
|
(17
|
)
|
CDOs
|
1,432
|
|
1,430
|
|
(2
|
)
|
184
|
|
183
|
|
(1
|
)
|
1,616
|
|
1,613
|
|
(3
|
)
|
|||||||||
CMBS
|
1,438
|
|
1,412
|
|
(26
|
)
|
157
|
|
144
|
|
(13
|
)
|
1,595
|
|
1,556
|
|
(39
|
)
|
|||||||||
Corporate
|
3,442
|
|
3,381
|
|
(61
|
)
|
1,085
|
|
1,041
|
|
(44
|
)
|
4,527
|
|
4,422
|
|
(105
|
)
|
|||||||||
Foreign govt./govt. agencies
|
270
|
|
266
|
|
(4
|
)
|
53
|
|
49
|
|
(4
|
)
|
323
|
|
315
|
|
(8
|
)
|
|||||||||
Municipal
|
960
|
|
932
|
|
(28
|
)
|
8
|
|
7
|
|
(1
|
)
|
968
|
|
939
|
|
(29
|
)
|
|||||||||
RMBS
|
635
|
|
630
|
|
(5
|
)
|
156
|
|
154
|
|
(2
|
)
|
791
|
|
784
|
|
(7
|
)
|
|||||||||
U.S. Treasuries
|
1,744
|
|
1,725
|
|
(19
|
)
|
—
|
|
—
|
|
—
|
|
1,744
|
|
1,725
|
|
(19
|
)
|
|||||||||
Total fixed maturities, AFS
|
$
|
10,558
|
|
$
|
10,412
|
|
$
|
(146
|
)
|
$
|
1,872
|
|
$
|
1,791
|
|
$
|
(81
|
)
|
$
|
12,430
|
|
$
|
12,203
|
|
$
|
(227
|
)
|
Equity securities, AFS
|
190
|
|
173
|
|
(17
|
)
|
25
|
|
22
|
|
(3
|
)
|
215
|
|
195
|
|
(20
|
)
|
|||||||||
Total securities in an unrealized loss position
|
$
|
10,748
|
|
$
|
10,585
|
|
$
|
(163
|
)
|
$
|
1,897
|
|
$
|
1,813
|
|
$
|
(84
|
)
|
$
|
12,645
|
|
$
|
12,398
|
|
$
|
(247
|
)
|
Unrealized Loss Aging for AFS Securities by Type and Length of Time as of December 31, 2016
|
|||||||||||||||||||||||||||
|
Less Than 12 Months
|
12 Months or More
|
Total
|
||||||||||||||||||||||||
|
Amortized Cost
|
Fair Value
|
Unrealized Losses
|
Amortized Cost
|
Fair Value
|
Unrealized Losses
|
Amortized Cost
|
Fair Value
|
Unrealized Losses
|
||||||||||||||||||
ABS
|
$
|
582
|
|
$
|
579
|
|
$
|
(3
|
)
|
$
|
368
|
|
$
|
340
|
|
$
|
(28
|
)
|
$
|
950
|
|
$
|
919
|
|
$
|
(31
|
)
|
CDOs
|
641
|
|
640
|
|
(1
|
)
|
370
|
|
367
|
|
(3
|
)
|
1,011
|
|
1,007
|
|
(4
|
)
|
|||||||||
CMBS
|
2,076
|
|
2,027
|
|
(49
|
)
|
293
|
|
274
|
|
(19
|
)
|
2,369
|
|
2,301
|
|
(68
|
)
|
|||||||||
Corporate
|
5,418
|
|
5,248
|
|
(170
|
)
|
835
|
|
781
|
|
(54
|
)
|
6,253
|
|
6,029
|
|
(224
|
)
|
|||||||||
Foreign govt./govt. agencies
|
573
|
|
550
|
|
(23
|
)
|
27
|
|
24
|
|
(3
|
)
|
600
|
|
574
|
|
(26
|
)
|
|||||||||
Municipal
|
1,567
|
|
1,498
|
|
(69
|
)
|
43
|
|
41
|
|
(2
|
)
|
1,610
|
|
1,539
|
|
(71
|
)
|
|||||||||
RMBS
|
1,655
|
|
1,624
|
|
(31
|
)
|
591
|
|
585
|
|
(6
|
)
|
2,246
|
|
2,209
|
|
(37
|
)
|
|||||||||
U.S. Treasuries
|
1,432
|
|
1,387
|
|
(45
|
)
|
—
|
|
—
|
|
—
|
|
1,432
|
|
1,387
|
|
(45
|
)
|
|||||||||
Total fixed maturities, AFS
|
$
|
13,944
|
|
$
|
13,553
|
|
$
|
(391
|
)
|
$
|
2,527
|
|
$
|
2,412
|
|
$
|
(115
|
)
|
$
|
16,471
|
|
$
|
15,965
|
|
$
|
(506
|
)
|
Equity securities, AFS
|
330
|
|
315
|
|
(15
|
)
|
38
|
|
34
|
|
(4
|
)
|
368
|
|
349
|
|
(19
|
)
|
|||||||||
Total securities in an unrealized loss position
|
$
|
14,274
|
|
$
|
13,868
|
|
$
|
(406
|
)
|
$
|
2,565
|
|
$
|
2,446
|
|
$
|
(119
|
)
|
$
|
16,839
|
|
$
|
16,314
|
|
$
|
(525
|
)
|
Commercial Mortgage Loans Credit Quality
|
||||||||
|
June 30, 2017
|
December 31, 2016
|
||||||
Loan-to-value
|
Carrying Value
|
Avg. Debt-Service Coverage Ratio
|
Carrying Value
|
Avg. Debt-Service Coverage Ratio
|
||||
Greater than 80%
|
$
|
5
|
|
1.36x
|
$
|
20
|
|
0.59x
|
65% - 80%
|
416
|
|
2.23x
|
568
|
|
2.17x
|
||
Less than 65%
|
5,375
|
|
2.73x
|
5,109
|
|
2.78x
|
||
Total commercial mortgage loans
|
$
|
5,796
|
|
2.69x
|
$
|
5,697
|
|
2.70x
|
Mortgage Loans by Region
|
||||||||||
|
June 30, 2017
|
December 31, 2016
|
||||||||
|
Carrying Value
|
Percent of Total
|
Carrying Value
|
Percent of Total
|
||||||
East North Central
|
$
|
293
|
|
5.1
|
%
|
$
|
293
|
|
5.1
|
%
|
East South Central
|
14
|
|
0.2
|
%
|
14
|
|
0.2
|
%
|
||
Middle Atlantic
|
544
|
|
9.4
|
%
|
534
|
|
9.4
|
%
|
||
Mountain
|
76
|
|
1.3
|
%
|
61
|
|
1.1
|
%
|
||
New England
|
388
|
|
6.7
|
%
|
345
|
|
6.1
|
%
|
||
Pacific
|
1,671
|
|
28.8
|
%
|
1,609
|
|
28.3
|
%
|
||
South Atlantic
|
1,265
|
|
21.8
|
%
|
1,198
|
|
21.0
|
%
|
||
West North Central
|
40
|
|
0.7
|
%
|
40
|
|
0.7
|
%
|
||
West South Central
|
347
|
|
6.0
|
%
|
338
|
|
5.9
|
%
|
||
Other [1]
|
1,158
|
|
20.0
|
%
|
1,265
|
|
22.2
|
%
|
||
Total mortgage loans
|
$
|
5,796
|
|
100.0
|
%
|
$
|
5,697
|
|
100.0
|
%
|
[1]
|
Primarily represents loans collateralized by multiple properties in various regions.
|
Mortgage Loans by Property Type
|
||||||||||
|
June 30, 2017
|
December 31, 2016
|
||||||||
|
Carrying Value
|
Percent of Total
|
Carrying
Value |
Percent of Total
|
||||||
Commercial
|
|
|
|
|
||||||
Agricultural
|
$
|
4
|
|
0.1
|
%
|
$
|
16
|
|
0.3
|
%
|
Industrial
|
1,439
|
|
24.8
|
%
|
1,468
|
|
25.7
|
%
|
||
Lodging
|
25
|
|
0.4
|
%
|
25
|
|
0.4
|
%
|
||
Multifamily
|
1,504
|
|
25.9
|
%
|
1,365
|
|
24.0
|
%
|
||
Office
|
1,389
|
|
24.0
|
%
|
1,361
|
|
23.9
|
%
|
||
Retail
|
1,000
|
|
17.3
|
%
|
1,036
|
|
18.2
|
%
|
||
Other
|
435
|
|
7.5
|
%
|
426
|
|
7.5
|
%
|
||
Total mortgage loans
|
$
|
5,796
|
|
100.0
|
%
|
$
|
5,697
|
|
100.0
|
%
|
Securities Lending and Repurchase Agreements
|
||||||
|
June 30, 2017
|
December 31, 2016
|
||||
|
Fair Value
|
Fair Value
|
|
|||
Securities Lending Transactions:
|
|
|
||||
Gross amount of securities on loan
|
$
|
1,512
|
|
$
|
488
|
|
Gross amount of associated liability for collateral received [1]
|
1,549
|
|
500
|
|
||
|
|
|
||||
Repurchase agreements:
|
|
|
||||
Gross amount of recognized liabilities for repurchase agreements
|
517
|
|
241
|
|
||
Gross amount of collateral pledged related to repurchase agreements [2]
|
527
|
|
248
|
|
||
Gross amount of recognized receivables for reverse repurchase agreements [3]
|
37
|
|
—
|
|
[1]
|
Cash collateral received is reinvested in fixed maturities, AFS and short term investments which are included in the Condensed Consolidated Balance Sheets. Amount includes additional securities collateral received of $
28
and $
39
million which are excluded from the Company's Condensed Consolidated Balance Sheets as of
June 30, 2017
and
December 31, 2016
, respectively.
|
[2]
|
Collateral pledged is included within fixed maturities, AFS and short term investments in the Company's Condensed Consolidated Balance Sheets.
|
[3]
|
Collateral received is included within short term investments in the Company's Condensed Consolidated Balance Sheets.
|
GMWB Hedging Instruments
|
||||||||||||
|
Notional Amount
|
Fair Value
|
||||||||||
|
Jun. 30, 2017
|
Dec. 31, 2016
|
Jun. 30, 2017
|
Dec. 31, 2016
|
||||||||
Customized swaps
|
$
|
5,102
|
|
$
|
5,191
|
|
$
|
74
|
|
$
|
100
|
|
Equity swaps, options, and futures
|
1,383
|
|
1,362
|
|
(35
|
)
|
(27
|
)
|
||||
Interest rate swaps and futures
|
2,999
|
|
3,703
|
|
46
|
|
21
|
|
||||
Total
|
$
|
9,484
|
|
$
|
10,256
|
|
$
|
85
|
|
$
|
94
|
|
Derivative Balance Sheet Presentation
|
||||||||||||||||||||||||
|
Net Derivatives
|
Asset Derivatives
|
Liability Derivatives
|
|||||||||||||||||||||
|
Notional Amount
|
Fair Value
|
Fair Value
|
Fair Value
|
||||||||||||||||||||
Hedge Designation/ Derivative Type
|
Jun. 30, 2017
|
Dec. 31, 2016
|
Jun. 30, 2017
|
Dec. 31, 2016
|
Jun. 30, 2017
|
Dec. 31, 2016
|
Jun. 30, 2017
|
Dec. 31, 2016
|
||||||||||||||||
Cash flow hedges
|
|
|
|
|
|
|
|
|
||||||||||||||||
Interest rate swaps
|
$
|
3,873
|
|
$
|
3,440
|
|
$
|
(1
|
)
|
$
|
(79
|
)
|
$
|
82
|
|
$
|
11
|
|
$
|
(83
|
)
|
$
|
(90
|
)
|
Foreign currency swaps
|
299
|
|
239
|
|
(15
|
)
|
(15
|
)
|
7
|
|
11
|
|
(22
|
)
|
(26
|
)
|
||||||||
Total cash flow hedges
|
4,172
|
|
3,679
|
|
(16
|
)
|
(94
|
)
|
89
|
|
22
|
|
(105
|
)
|
(116
|
)
|
||||||||
Non-qualifying strategies
|
|
|
|
|
|
|
|
|
||||||||||||||||
Interest rate contracts
|
|
|
|
|
|
|
|
|
||||||||||||||||
Interest rate swaps, swaptions, and futures
|
10,882
|
|
11,743
|
|
(485
|
)
|
(890
|
)
|
643
|
|
264
|
|
(1,128
|
)
|
(1,154
|
)
|
||||||||
Foreign exchange contracts
|
|
|
|
|
|
|
|
|
||||||||||||||||
Foreign currency swaps and forwards
|
165
|
|
1,064
|
|
—
|
|
68
|
|
—
|
|
70
|
|
—
|
|
(2
|
)
|
||||||||
Fixed payout annuity hedge
|
804
|
|
804
|
|
(252
|
)
|
(263
|
)
|
—
|
|
—
|
|
(252
|
)
|
(263
|
)
|
||||||||
Credit contracts
|
|
|
|
|
|
|
|
|
||||||||||||||||
Credit derivatives that purchase credit protection
|
115
|
|
209
|
|
(3
|
)
|
(4
|
)
|
—
|
|
—
|
|
(3
|
)
|
(4
|
)
|
||||||||
Credit derivatives that assume credit risk [1]
|
1,654
|
|
1,309
|
|
2
|
|
10
|
|
29
|
|
15
|
|
(27
|
)
|
(5
|
)
|
||||||||
Credit derivatives in offsetting positions
|
1,934
|
|
3,317
|
|
3
|
|
(1
|
)
|
29
|
|
39
|
|
(26
|
)
|
(40
|
)
|
||||||||
Equity contracts
|
|
|
|
|
|
|
|
|
||||||||||||||||
Equity index swaps and options
|
321
|
|
105
|
|
3
|
|
—
|
|
40
|
|
33
|
|
(37
|
)
|
(33
|
)
|
||||||||
Variable annuity hedge program
|
|
|
|
|
|
|
|
|
||||||||||||||||
GMWB product derivatives [2]
|
12,178
|
|
13,114
|
|
(134
|
)
|
(241
|
)
|
—
|
|
—
|
|
(134
|
)
|
(241
|
)
|
||||||||
GMWB reinsurance contracts
|
2,527
|
|
2,709
|
|
57
|
|
73
|
|
57
|
|
73
|
|
—
|
|
—
|
|
||||||||
GMWB hedging instruments
|
9,484
|
|
10,256
|
|
85
|
|
94
|
|
150
|
|
190
|
|
(65
|
)
|
(96
|
)
|
||||||||
Macro hedge program
|
6,885
|
|
6,532
|
|
168
|
|
178
|
|
182
|
|
201
|
|
(14
|
)
|
(23
|
)
|
||||||||
Other
|
|
|
|
|
|
|
|
|
||||||||||||||||
Contingent capital facility put option
|
—
|
|
500
|
|
—
|
|
1
|
|
—
|
|
1
|
|
—
|
|
—
|
|
||||||||
Modified coinsurance reinsurance contracts
|
889
|
|
875
|
|
58
|
|
68
|
|
58
|
|
68
|
|
—
|
|
—
|
|
||||||||
Total non-qualifying strategies
|
47,838
|
|
52,537
|
|
(498
|
)
|
(907
|
)
|
1,188
|
|
954
|
|
(1,686
|
)
|
(1,861
|
)
|
||||||||
Total cash flow hedges, fair value hedges, and non-qualifying strategies
|
$
|
52,010
|
|
$
|
56,216
|
|
$
|
(514
|
)
|
$
|
(1,001
|
)
|
$
|
1,277
|
|
$
|
976
|
|
$
|
(1,791
|
)
|
$
|
(1,977
|
)
|
Balance Sheet Location
|
|
|
|
|
|
|
|
|
||||||||||||||||
Fixed maturities, available-for-sale
|
$
|
155
|
|
$
|
322
|
|
$
|
—
|
|
$
|
1
|
|
$
|
—
|
|
$
|
1
|
|
$
|
—
|
|
$
|
—
|
|
Other investments
|
7,534
|
|
23,620
|
|
151
|
|
(180
|
)
|
171
|
|
377
|
|
(20
|
)
|
(557
|
)
|
||||||||
Other liabilities
|
28,677
|
|
15,526
|
|
(609
|
)
|
(689
|
)
|
991
|
|
457
|
|
(1,600
|
)
|
(1,146
|
)
|
||||||||
Reinsurance recoverables
|
3,416
|
|
3,584
|
|
115
|
|
141
|
|
115
|
|
141
|
|
—
|
|
—
|
|
||||||||
Other policyholder funds and benefits payable
|
12,228
|
|
13,164
|
|
(171
|
)
|
(274
|
)
|
—
|
|
—
|
|
(171
|
)
|
(274
|
)
|
||||||||
Total derivatives
|
$
|
52,010
|
|
$
|
56,216
|
|
$
|
(514
|
)
|
$
|
(1,001
|
)
|
$
|
1,277
|
|
$
|
976
|
|
$
|
(1,791
|
)
|
$
|
(1,977
|
)
|
[1]
|
The derivative instruments related to this strategy are held for other investment purposes.
|
[2]
|
These derivatives are embedded within liabilities and are not held for risk management purposes.
|
Offsetting Derivative Assets and Liabilities
|
|||||||||||||||||||||||
|
(i)
|
|
(ii)
|
|
(iii) = (i) - (ii)
|
(iv)
|
|
(v) = (iii) - (iv)
|
|||||||||||||||
|
|
|
|
|
Net Amounts Presented in the Statement of Financial Position
|
|
Collateral Disallowed for Offset in the Statement of Financial Position
|
|
|
||||||||||||||
|
Gross Amounts of Recognized Assets (Liabilities)
|
|
Gross Amounts Offset in the Statement of Financial Position
|
|
Derivative Assets [1] (Liabilities) [2]
|
|
Accrued Interest and Cash Collateral (Received) [3] Pledged [2]
|
|
Financial Collateral (Received) Pledged [4]
|
|
Net Amount
|
||||||||||||
As of June 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Other investments
|
$
|
1,162
|
|
|
$
|
1,085
|
|
|
$
|
151
|
|
|
$
|
(74
|
)
|
|
$
|
41
|
|
|
$
|
36
|
|
Other liabilities
|
$
|
(1,620
|
)
|
|
$
|
(781
|
)
|
|
$
|
(609
|
)
|
|
$
|
(230
|
)
|
|
$
|
(827
|
)
|
|
$
|
(12
|
)
|
As of December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Other investments
|
$
|
834
|
|
|
$
|
670
|
|
|
$
|
(180
|
)
|
|
$
|
344
|
|
|
$
|
103
|
|
|
$
|
61
|
|
Other liabilities
|
$
|
(1,703
|
)
|
|
$
|
(884
|
)
|
|
$
|
(689
|
)
|
|
$
|
(130
|
)
|
|
$
|
(763
|
)
|
|
$
|
(56
|
)
|
[1]
|
Included in other investments in the Company's Condensed Consolidated Balance Sheets.
|
[2]
|
Included in other liabilities in the Company's Condensed Consolidated Balance Sheets and is limited to the net derivative payable associated with each counterparty.
|
[3]
|
Included in other investments in the Company's Condensed Consolidated Balance Sheets and is limited to the net derivative receivable associated with each counterparty.
|
[4]
|
Excludes collateral associated with exchange-traded derivative instruments.
|
Derivatives in Cash Flow Hedging Relationships
|
|||||||||||||||
|
Gain (Loss) Recognized in OCI on Derivative (Effective Portion)
|
||||||||||||||
|
Three Months Ended June 30,
|
|
Six months ended June 30,
|
||||||||||||
|
2017
|
|
2016
|
|
|
2017
|
|
2016
|
|||||||
Interest rate swaps
|
$
|
21
|
|
|
$
|
40
|
|
|
$
|
14
|
|
|
$
|
146
|
|
Foreign currency swaps
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
1
|
|
||||
Total
|
$
|
20
|
|
|
$
|
40
|
|
|
$
|
14
|
|
|
$
|
147
|
|
|
Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)
|
||||||||||||||
|
Three Months Ended June 30,
|
|
Six Months Ended June 30, 2017
|
|
|||||||||||
|
2017
|
|
2016
|
|
2017
|
|
|
2016
|
|
||||||
Interest rate swaps
|
|
|
|
|
|
|
|||||||||
Net realized
capital gain/(loss)
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
4
|
|
|
$
|
7
|
|
Net investment income
|
16
|
|
|
15
|
|
|
32
|
|
|
30
|
|
||||
Foreign currency swaps
|
|
|
|
|
|
|
|
||||||||
Net realized
capital gain/(loss)
|
5
|
|
|
(2
|
)
|
|
6
|
|
|
2
|
|
||||
Total
|
$
|
21
|
|
|
$
|
15
|
|
|
$
|
42
|
|
|
$
|
39
|
|
Non-Qualifying Strategies Recognized within Net Realized Capital Gains (Losses)
|
|||||||||||||
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
|
2017
|
2016
|
|
2017
|
2016
|
||||||||
Variable annuity hedge program
|
|
|
|
|
|
||||||||
GMWB product derivatives
|
$
|
39
|
|
$
|
(30
|
)
|
|
$
|
140
|
|
$
|
(109
|
)
|
GMWB reinsurance contracts
|
(6
|
)
|
1
|
|
|
(24
|
)
|
13
|
|
||||
GMWB hedging instruments
|
(13
|
)
|
32
|
|
|
(78
|
)
|
82
|
|
||||
Macro hedge program
|
(38
|
)
|
(20
|
)
|
|
(124
|
)
|
(34
|
)
|
||||
Total variable annuity hedge program
|
(18
|
)
|
(17
|
)
|
|
(86
|
)
|
(48
|
)
|
||||
Foreign exchange contracts
|
|
|
|
|
|
||||||||
Foreign currency swaps and forwards
|
(7
|
)
|
22
|
|
|
(17
|
)
|
25
|
|
||||
Fixed payout annuity hedge
|
(10
|
)
|
60
|
|
|
11
|
|
96
|
|
||||
Total foreign exchange contracts
|
(17
|
)
|
82
|
|
|
(6
|
)
|
121
|
|
||||
Other non-qualifying derivatives
|
|
|
|
|
|
||||||||
Interest rate contracts
|
|
|
|
|
|
||||||||
Interest rate swaps, swaptions, and futures
|
(1
|
)
|
4
|
|
|
6
|
|
(20
|
)
|
||||
Credit contracts
|
|
|
|
|
|
||||||||
Credit derivatives that purchase credit protection
|
41
|
|
(2
|
)
|
|
30
|
|
(7
|
)
|
||||
Credit derivatives that assume credit risk
|
(33
|
)
|
6
|
|
|
(16
|
)
|
4
|
|
||||
Equity contracts
|
|
|
|
|
|
||||||||
Equity index swaps and options
|
(4
|
)
|
(5
|
)
|
|
(4
|
)
|
13
|
|
||||
Other
|
|
|
|
|
|
||||||||
Contingent capital facility put option
|
—
|
|
(1
|
)
|
|
(1
|
)
|
(3
|
)
|
||||
Modified coinsurance reinsurance contracts
|
(8
|
)
|
(25
|
)
|
|
(10
|
)
|
(47
|
)
|
||||
Total other non-qualifying derivatives
|
(5
|
)
|
(23
|
)
|
|
5
|
|
(60
|
)
|
||||
Total [1]
|
$
|
(40
|
)
|
$
|
42
|
|
|
$
|
(87
|
)
|
$
|
13
|
|
[1]
|
Excludes investments that contain an embedded credit derivative for which the Company has elected the fair value option. For further discussion, see the Fair Value Option section in Note
5
-
Fair Value Measurements
.
|
Credit Derivatives by Type
|
|||||||||||||||
|
|
|
|
Underlying Referenced Credit
Obligation(s) [1]
|
|
|
|||||||||
|
Notional
Amount
[2]
|
Fair
Value
|
Weighted
Average
Years to
Maturity
|
Type
|
Average
Credit
Rating
|
Offsetting
Notional
Amount [3]
|
Offsetting
Fair
Value [3]
|
||||||||
As of June 30, 2017
|
|||||||||||||||
Single name credit default swaps
|
|
|
|
|
|
|
|
||||||||
Investment grade risk exposure
|
$
|
204
|
|
$
|
4
|
|
5 years
|
Corporate Credit/
Foreign Gov. |
A-
|
$
|
15
|
|
$
|
—
|
|
Below investment grade risk exposure
|
52
|
|
—
|
|
1 year
|
Corporate Credit
|
B-
|
52
|
|
—
|
|
||||
Basket credit default swaps [4]
|
|
|
|
|
|
|
|
||||||||
Investment grade risk exposure
|
2,054
|
|
5
|
|
4 years
|
Corporate Credit
|
BBB+
|
719
|
|
(5
|
)
|
||||
Below investment grade risk exposure
|
50
|
|
4
|
|
4 years
|
Corporate Credit
|
B+
|
50
|
|
—
|
|
||||
Investment grade risk exposure
|
174
|
|
(3
|
)
|
5 years
|
CMBS Credit
|
AA-
|
44
|
|
1
|
|
||||
Below investment grade risk exposure
|
87
|
|
(16
|
)
|
Less than 1 year
|
CMBS Credit
|
CCC
|
87
|
|
15
|
|
||||
Total [5]
|
$
|
2,621
|
|
$
|
(6
|
)
|
|
|
|
$
|
967
|
|
$
|
11
|
|
As of December 31, 2016
|
|||||||||||||||
Single name credit default swaps
|
|
|
|
|
|
|
|
||||||||
Investment grade risk exposure
|
$
|
169
|
|
$
|
—
|
|
4 years
|
Corporate Credit/
Foreign Gov. |
A-
|
$
|
50
|
|
$
|
—
|
|
Below investment grade risk exposure
|
77
|
|
—
|
|
1 year
|
Corporate Credit
|
B+
|
77
|
|
—
|
|
||||
Basket credit default swaps [4]
|
|
|
|
|
|
|
|
||||||||
Investment grade risk exposure
|
2,065
|
|
22
|
|
3 years
|
Corporate Credit
|
BBB+
|
1,204
|
|
(10
|
)
|
||||
Below investment grade risk exposure
|
50
|
|
3
|
|
4 years
|
Corporate Credit
|
B
|
50
|
|
(3
|
)
|
||||
Investment grade risk exposure
|
297
|
|
(5
|
)
|
4 years
|
CMBS Credit
|
AA
|
167
|
|
1
|
|
||||
Below investment grade risk exposure
|
110
|
|
(26
|
)
|
1 year
|
CMBS Credit
|
CCC
|
111
|
|
26
|
|
||||
Embedded credit derivatives
|
|
|
|
|
|
|
|
||||||||
Investment grade risk exposure
|
200
|
|
201
|
|
Less than 1 year
|
Corporate Credit
|
A+
|
—
|
|
—
|
|
||||
Total [5]
|
$
|
2,968
|
|
$
|
195
|
|
|
|
|
$
|
1,659
|
|
$
|
14
|
|
[1]
|
The average credit ratings are based on availability and are generally the midpoint of the available ratings among Moody’s, S&P, Fitch and Morningstar. If no rating is available from a rating agency, then an internally developed rating is used.
|
[2]
|
Notional amount is equal to the maximum potential future loss amount. These derivatives are governed by agreements, clearing house rules and applicable law, which include collateral posting requirements. There is no additional specific collateral related to these contracts or recourse provisions included in the contracts to offset losses.
|
[3]
|
The Company has entered into offsetting credit default swaps to terminate certain existing credit default swaps, thereby offsetting the future changes in value of, or losses paid related to, the original swap.
|
[4]
|
Includes
$2.4 billion
and
$2.5 billion
as of
June 30, 2017
, and
December 31, 2016
, respectively, of notional amount on swaps of standard market indices of diversified portfolios of corporate and CMBS issuers referenced through credit default swaps. These swaps are subsequently valued based upon the observable standard market index.
|
[5]
|
Excludes investments that contain an embedded credit derivative for which the Company has elected the fair value option. For further discussion, see the Fair Value Option section in Note
5
-
Fair Value Measurements
.
|
|
For the six months ended June 30,
|
|||||
|
2017
|
2016
|
||||
Beginning liabilities for unpaid losses and loss adjustment expenses, gross
|
$
|
21,833
|
|
$
|
21,825
|
|
Reinsurance and other recoverables
|
2,776
|
|
2,882
|
|
||
Beginning liabilities for unpaid losses and loss adjustment expenses, net
|
19,057
|
|
18,943
|
|
||
Provision for unpaid losses and loss adjustment expenses
|
|
|
|
|
||
Current accident year
|
3,563
|
|
3,447
|
|
||
Prior accident year development
|
2
|
|
384
|
|
||
Total provision for unpaid losses and loss adjustment expenses
|
3,565
|
|
3,831
|
|
||
Less: payments
|
|
|
|
|
||
Current accident year
|
1,009
|
|
1,066
|
|
||
Prior accident years
|
2,292
|
|
2,550
|
|
||
Total payments
|
3,301
|
|
3,616
|
|
||
Ending liabilities for unpaid losses and loss adjustment expenses, net
|
19,321
|
|
19,158
|
|
||
Reinsurance and other recoverables [1]
|
2,809
|
|
2,746
|
|
||
Ending liabilities for unpaid losses and loss adjustment expenses, gross
|
$
|
22,130
|
|
$
|
21,904
|
|
[1]
|
Includes reinsurance recoverables of
$2,350
and
$2,461
for the six months ended
June 30, 2017
and
2016
, respectively.
|
|
For the six months ended June 30,
|
|||||
|
2017
|
2016
|
||||
Workers’ compensation
|
$
|
(20
|
)
|
$
|
(83
|
)
|
Workers’ compensation discount accretion
|
16
|
|
14
|
|
||
General liability
|
10
|
|
66
|
|
||
Package business
|
—
|
|
52
|
|
||
Commercial property
|
(6
|
)
|
(3
|
)
|
||
Professional liability
|
—
|
|
(33
|
)
|
||
Bond
|
(10
|
)
|
(6
|
)
|
||
Automobile liability - Commercial Lines
|
20
|
|
1
|
|
||
Automobile liability - Personal Lines
|
—
|
|
140
|
|
||
Homeowners
|
—
|
|
(5
|
)
|
||
Net asbestos reserves
|
—
|
|
197
|
|
||
Net environmental reserves
|
—
|
|
71
|
|
||
Catastrophes
|
(13
|
)
|
(5
|
)
|
||
Uncollectible reinsurance
|
—
|
|
(30
|
)
|
||
Other reserve re-estimates, net
|
5
|
|
8
|
|
||
Total prior accident year development
|
$
|
2
|
|
$
|
384
|
|
|
For the six months ended June 30,
|
|||||
|
2017
|
2016 [1]
|
||||
Beginning liabilities for unpaid losses and loss adjustment expenses, gross
|
$
|
5,772
|
|
$
|
5,889
|
|
Reinsurance recoverables
|
208
|
|
218
|
|
||
Beginning liabilities for unpaid losses and loss adjustment expenses, net
|
5,564
|
|
5,671
|
|
||
Provision for unpaid losses and loss adjustment expenses
|
|
|
|
|
||
Current incurral year
|
1,319
|
|
1,287
|
|
||
Prior year's discount accretion
|
101
|
|
105
|
|
||
Prior incurral year development [2]
|
(112
|
)
|
(98
|
)
|
||
Total provision for unpaid losses and loss adjustment expenses [3]
|
1,308
|
|
1,294
|
|
||
Less: payments
|
|
|
|
|
||
Current incurral year
|
542
|
|
523
|
|
||
Prior incurral years
|
833
|
|
836
|
|
||
Total payments
|
1,375
|
|
1,359
|
|
||
Ending liabilities for unpaid losses and loss adjustment expenses, net
|
5,497
|
|
5,606
|
|
||
Reinsurance recoverables
|
212
|
|
216
|
|
||
Ending liabilities for unpaid losses and loss adjustment expenses, gross
|
$
|
5,709
|
|
$
|
5,822
|
|
[1]
|
Certain prior year amounts have been reclassified to conform to the current year presentation for unpaid losses and loss adjustment expenses.
|
[2]
|
Prior incurral year development represents the change in estimated ultimate incurred losses and loss adjustment expenses for prior incurral years on a discounted basis.
|
[3]
|
Includes unallocated loss adjustment expenses of
$48
, and
$51
for for the six months ended
June 30, 2017
and
2016
, respectively, that are recorded in insurance operating costs and other expenses in the Condensed Consolidated Statements of Operations.
|
Changes in Reserves for Future Policy Benefits
|
||||||||||||
|
Universal Life - Type Contracts
|
|
|
|||||||||
|
GMDB/GMWB [1]
|
Universal Life Secondary Guarantees
|
Traditional Annuity and Other Contracts [2]
|
Total Future Policy Benefits
|
||||||||
Liability balance as of January 1, 2017
|
$
|
786
|
|
$
|
2,627
|
|
$
|
10,516
|
|
$
|
13,929
|
|
Incurred [3]
|
33
|
|
149
|
|
408
|
|
590
|
|
||||
Paid
|
(52
|
)
|
—
|
|
(401
|
)
|
(453
|
)
|
||||
Change in unrealized investment gains and losses
|
—
|
|
—
|
|
90
|
|
90
|
|
||||
Liability balance as of June 30, 2017
|
$
|
767
|
|
$
|
2,776
|
|
$
|
10,613
|
|
$
|
14,156
|
|
Reinsurance recoverable asset, as of January 1, 2017
|
$
|
432
|
|
$
|
2,627
|
|
$
|
1,392
|
|
$
|
4,451
|
|
Incurred [3]
|
22
|
|
149
|
|
49
|
|
220
|
|
||||
Paid
|
(43
|
)
|
—
|
|
(27
|
)
|
(70
|
)
|
||||
Reinsurance recoverable asset, as of June 30, 2017
|
$
|
411
|
|
$
|
2,776
|
|
$
|
1,414
|
|
$
|
4,601
|
|
|
Universal Life - Type Contracts
|
|
|
|||||||||
|
GMDB/GMWB [1]
|
Universal Life Secondary Guarantees
|
Traditional Annuity and Other Contracts [2]
|
Total Future Policy Benefits
|
||||||||
Liability balance as of January 1, 2016
|
$
|
863
|
|
$
|
2,313
|
|
$
|
10,683
|
|
$
|
13,859
|
|
Incurred [3]
|
41
|
|
158
|
|
392
|
|
591
|
|
||||
Paid
|
(66
|
)
|
—
|
|
(398
|
)
|
(464
|
)
|
||||
Change in unrealized investment gains and losses
|
—
|
|
—
|
|
460
|
|
460
|
|
||||
Liability balance as of June 30, 2016
|
$
|
838
|
|
$
|
2,471
|
|
$
|
11,137
|
|
$
|
14,446
|
|
Reinsurance recoverable asset, as of January 1, 2016
|
$
|
523
|
|
$
|
2,313
|
|
$
|
1,478
|
|
$
|
4,314
|
|
Incurred [3]
|
32
|
|
158
|
|
37
|
|
227
|
|
||||
Paid
|
(51
|
)
|
—
|
|
(33
|
)
|
(84
|
)
|
||||
Reinsurance recoverable asset, as of June 30, 2016
|
$
|
504
|
|
$
|
2,471
|
|
$
|
1,482
|
|
$
|
4,457
|
|
[1]
|
These liability balances include all GMDB benefits, plus the life-contingent portion of GMWB benefits in excess of the return of the GRB. GMWB benefits that make up a shortfall between the account value and the GRB are embedded derivatives held at fair value and are excluded from these balances.
|
[2]
|
Represents life-contingent reserves for which the company is subject to insurance and investment risk.
|
[3]
|
Includes the portion of assessments established as additions to reserves as well as changes in estimates affecting the reserves.
|
Account Value by GMDB/GMWB Type as of June 30, 2017
|
||||||||||
Maximum anniversary value (“MAV”) [1]
|
Account Value (“AV”) [8]
|
Net Amount at Risk (“NAR”) [9]
|
Retained Net Amount at Risk (“RNAR”) [9]
|
Weighted Average Attained Age of Annuitant
|
||||||
MAV only
|
$
|
13,641
|
|
$
|
2,109
|
|
$
|
316
|
|
71
|
With 5% rollup [2]
|
1,155
|
|
154
|
|
49
|
|
71
|
|||
With Earnings Protection Benefit Rider (“EPB”) [3]
|
3,465
|
|
504
|
|
79
|
|
71
|
|||
With 5% rollup & EPB
|
475
|
|
104
|
|
23
|
|
73
|
|||
Total MAV
|
18,736
|
|
2,871
|
|
467
|
|
|
|||
Asset Protection Benefit (“APB”) [4]
|
10,243
|
|
114
|
|
76
|
|
70
|
|||
Lifetime Income Benefit (“LIB”) — Death Benefit [5]
|
459
|
|
5
|
|
5
|
|
70
|
|||
Reset [6] (5-7 years)
|
2,437
|
|
7
|
|
6
|
|
70
|
|||
Return of Premium (“ROP”) [7]/Other
|
8,793
|
|
59
|
|
56
|
|
71
|
|||
Subtotal Variable Annuity with GMDB/GMWB [10]
|
40,668
|
|
$
|
3,056
|
|
$
|
610
|
|
71
|
|
Less: General Account Value with GMDB/GMWB
|
3,686
|
|
|
|
|
|||||
Subtotal Separate Account Liabilities with GMDB
|
36,982
|
|
|
|
|
|||||
Separate Account Liabilities without GMDB
|
79,764
|
|
|
|
|
|||||
Total Separate Account Liabilities
|
$
|
116,746
|
|
|
|
|
[1]
|
MAV GMDB is the greatest of current AV, net premiums paid and the highest AV on any anniversary before age
80 years
(adjusted for withdrawals).
|
[2]
|
Rollup GMDB is the greatest of the MAV, current AV, net premium paid and premiums (adjusted for withdrawals) accumulated at generally
5%
simple interest up to the earlier of age
80 years
or
100%
of adjusted premiums.
|
[3]
|
EPB GMDB is the greatest of the MAV, current AV, or contract value plus a percentage of the contract’s growth. The contract’s growth is AV less premiums net of withdrawals, subject to a cap of
200%
of premiums net of withdrawals.
|
[4]
|
APB GMDB is the greater of current AV or MAV, not to exceed current AV plus
25%
times the greater of net premiums and MAV (each adjusted for premiums in the past
12 months
).
|
[5]
|
LIB GMDB is the greatest of current AV; net premiums paid; or, for certain contracts, a benefit amount generally based on market performance that ratchets over time.
|
[6]
|
Reset GMDB is the greatest of current AV, net premiums paid and the most recent
five
to
seven
year anniversary AV before age
80 years
(adjusted for withdrawals).
|
[7]
|
ROP GMDB is the greater of current AV or net premiums paid.
|
[8]
|
AV includes the contract holder’s investment in the separate account and the general account.
|
[9]
|
NAR is defined as the guaranteed minimum death benefit in excess of the current AV. RNAR represents NAR reduced for reinsurance. NAR and RNAR are highly sensitive to equity markets movements and increase when equity markets decline.
|
Income Tax Rate Reconciliation
|
||||||||||||
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
||||||||||
|
2017
|
2016
|
2017
|
2016
|
||||||||
Tax provision at U.S. federal statutory rate
|
$
|
(48
|
)
|
$
|
60
|
|
$
|
122
|
|
$
|
193
|
|
Tax-exempt interest
|
(30
|
)
|
(31
|
)
|
(60
|
)
|
(63
|
)
|
||||
Dividends-received deduction ("DRD")
|
(19
|
)
|
(21
|
)
|
(38
|
)
|
(43
|
)
|
||||
Decrease in deferred tax valuation allowance
|
—
|
|
(53
|
)
|
—
|
|
(78
|
)
|
||||
Stock-based compensation
|
(1
|
)
|
—
|
|
(8
|
)
|
—
|
|
||||
Other
|
(1
|
)
|
(1
|
)
|
(6
|
)
|
3
|
|
||||
Provision for income taxes
|
$
|
(99
|
)
|
$
|
(46
|
)
|
$
|
10
|
|
$
|
12
|
|
Roll-forward of Unrecognized Tax Benefits
|
||||||||||||
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
||||||||||
|
2017
|
2016
|
2017
|
2016
|
||||||||
Balance, beginning of period
|
$
|
12
|
|
$
|
12
|
|
$
|
12
|
|
$
|
12
|
|
Gross increases - tax positions in prior period
|
—
|
|
—
|
|
—
|
|
—
|
|
||||
Gross decreases - tax positions in prior period
|
—
|
|
—
|
|
—
|
|
—
|
|
||||
Balance, end of period
|
$
|
12
|
|
$
|
12
|
|
$
|
12
|
|
$
|
12
|
|
Future Tax Benefits
|
||||||||||||||||||
|
As of
|
|
||||||||||||||||
|
June 30, 2017
|
December 31, 2016
|
Expiration
|
|||||||||||||||
|
Carryover amount
|
Expected tax benefit, gross
|
Carryover amount
|
Expected tax benefit, gross
|
Dates
|
Amount
|
||||||||||||
Net operating loss carryover - U.S.
|
$
|
4,624
|
|
$
|
1,618
|
|
$
|
5,412
|
|
$
|
1,894
|
|
2020
|
|
|
$
|
1
|
|
|
|
|
|
|
2023
|
-
|
2036
|
$
|
4,623
|
|
||||||||
Net operating loss carryover - foreign
|
$
|
3
|
|
$
|
—
|
|
$
|
48
|
|
$
|
9
|
|
No expiration
|
$
|
3
|
|
||
Foreign tax credit carryover
|
$
|
42
|
|
$
|
42
|
|
$
|
56
|
|
$
|
56
|
|
2021
|
-
|
2024
|
$
|
42
|
|
Alternative minimum tax credit carryover
|
$
|
777
|
|
$
|
777
|
|
$
|
640
|
|
$
|
640
|
|
No expiration
|
$
|
777
|
|
||
General business credit carryover
|
$
|
2
|
|
$
|
2
|
|
$
|
99
|
|
$
|
99
|
|
2031
|
-
|
2035
|
$
|
2
|
|
Capital loss carryover
|
$
|
91
|
|
$
|
32
|
|
$
|
—
|
|
$
|
—
|
|
2022
|
$
|
91
|
|
Equity Repurchase Activity and Remaining Repurchase Capacity
|
|||||||||||
Three months ended
|
Common Shares
Repurchased
|
Cost of Shares Repurchased
|
Average Price Paid per Share
|
Remaining Capacity Under Share Repurchase Authorization
|
|||||||
(In millions, except for per share data)
|
|
|
|
|
|||||||
March 31, 2017
|
6.7
|
|
$
|
325
|
|
$
|
48.47
|
|
$
|
975
|
|
June 30, 2017
|
6.6
|
|
$
|
325
|
|
$
|
49.34
|
|
$
|
650
|
|
Total
|
13.3
|
|
$
|
650
|
|
|
|
|
Changes in AOCI, Net of Tax for the Three Months Ended June 30, 2017
|
||||||||||||||||||
|
Changes in
|
|||||||||||||||||
|
Net Unrealized Gain on Securities
|
OTTI Losses in OCI
|
Net Gain on Cash Flow Hedging Instruments
|
Foreign Currency Translation Adjustments
|
Pension and Other Postretirement Plan Adjustments
|
AOCI, net of tax
|
||||||||||||
Beginning balance
|
$
|
1,413
|
|
$
|
(4
|
)
|
$
|
58
|
|
$
|
8
|
|
$
|
(1,682
|
)
|
$
|
(207
|
)
|
OCI before reclassifications
|
404
|
|
1
|
|
13
|
|
5
|
|
(141
|
)
|
282
|
|
||||||
Amounts reclassified from AOCI
|
(62
|
)
|
—
|
|
(14
|
)
|
—
|
|
495
|
|
419
|
|
||||||
OCI, net of tax
|
342
|
|
1
|
|
(1
|
)
|
5
|
|
354
|
|
701
|
|
||||||
Ending balance
|
$
|
1,755
|
|
$
|
(3
|
)
|
$
|
57
|
|
$
|
13
|
|
$
|
(1,328
|
)
|
$
|
494
|
|
Changes in AOCI, Net of Tax for the Six Months Ended June 30, 2017
|
||||||||||||||||||
|
Changes in
|
|||||||||||||||||
|
Net Unrealized Gain on Securities
|
OTTI Losses in OCI
|
Net Gain on Cash Flow Hedging Instruments
|
Foreign Currency Translation Adjustments
|
Pension and Other Postretirement Plan Adjustments
|
AOCI, net of tax
|
||||||||||||
Beginning balance
|
$
|
1,276
|
|
$
|
(3
|
)
|
$
|
76
|
|
$
|
6
|
|
$
|
(1,692
|
)
|
$
|
(337
|
)
|
OCI before reclassifications
|
564
|
|
—
|
|
8
|
|
7
|
|
(140
|
)
|
439
|
|
||||||
Amounts reclassified from AOCI
|
(85
|
)
|
—
|
|
(27
|
)
|
—
|
|
504
|
|
392
|
|
||||||
OCI, net of tax
|
479
|
|
—
|
|
(19
|
)
|
7
|
|
364
|
|
831
|
|
||||||
Ending balance
|
$
|
1,755
|
|
$
|
(3
|
)
|
$
|
57
|
|
$
|
13
|
|
$
|
(1,328
|
)
|
$
|
494
|
|
Reclassifications from AOCI
|
|||||||
|
Three Months Ended June 30, 2017
|
Six Months Ended June 30, 2017
|
Affected Line Item in the Condensed Consolidated Statement of Operations
|
||||
Net Unrealized Gain on Securities
|
|
|
|
||||
Available-for-sale securities
|
$
|
95
|
|
$
|
131
|
|
Net realized capital gains (losses)
|
|
95
|
|
131
|
|
Income before income taxes
|
||
|
33
|
|
46
|
|
Income tax expense (benefit)
|
||
|
$
|
62
|
|
$
|
85
|
|
Net income
|
Net Gains on Cash Flow Hedging Instruments
|
|
|
|
||||
Interest rate swaps
|
$
|
—
|
|
$
|
4
|
|
Net realized capital gains (losses)
|
Interest rate swaps
|
16
|
|
32
|
|
Net investment income
|
||
Foreign currency swaps
|
5
|
|
6
|
|
Net realized capital gains (losses)
|
||
|
21
|
|
42
|
|
Income before income taxes
|
||
|
7
|
|
15
|
|
Income tax expense (benefit)
|
||
|
$
|
14
|
|
$
|
27
|
|
Net income
|
Pension and Other Postretirement Plan Adjustments
|
|
|
|
||||
Amortization of prior service credit
|
$
|
2
|
|
$
|
3
|
|
Insurance operating costs and other expenses
|
Amortization of actuarial loss
|
(16
|
)
|
(32
|
)
|
Insurance operating costs and other expenses
|
||
Settlement loss
|
(747
|
)
|
(747
|
)
|
Insurance operating costs and other expenses
|
||
|
(761
|
)
|
(776
|
)
|
Income (loss) before income taxes
|
||
|
(266
|
)
|
(272
|
)
|
Income tax expense (benefit)
|
||
|
$
|
(495
|
)
|
$
|
(504
|
)
|
Net income (loss)
|
Total amounts reclassified from AOCI
|
$
|
(419
|
)
|
$
|
(392
|
)
|
Net income (loss)
|
Changes in AOCI, Net of Tax for the Three Months Ended June 30, 2016
|
||||||||||||||||||
|
Changes in
|
|||||||||||||||||
|
Net Unrealized Gain on Securities
|
OTTI Losses in OCI
|
Net Gain on Cash Flow Hedging Instruments
|
Foreign Currency Translation Adjustments
|
Pension and Other Postretirement Plan Adjustments
|
AOCI, net of tax
|
||||||||||||
Beginning balance
|
$
|
1,801
|
|
$
|
(15
|
)
|
$
|
184
|
|
$
|
(49
|
)
|
$
|
(1,667
|
)
|
$
|
254
|
|
OCI before reclassifications
|
696
|
|
3
|
|
26
|
|
(19
|
)
|
—
|
|
706
|
|
||||||
Amounts reclassified from AOCI
|
(60
|
)
|
2
|
|
(10
|
)
|
—
|
|
8
|
|
(60
|
)
|
||||||
OCI, net of tax
|
636
|
|
5
|
|
16
|
|
(19
|
)
|
8
|
|
646
|
|
||||||
Ending balance
|
$
|
2,437
|
|
$
|
(10
|
)
|
$
|
200
|
|
$
|
(68
|
)
|
$
|
(1,659
|
)
|
$
|
900
|
|
Changes in AOCI, Net of Tax for the Six Months Ended June 30, 2016
|
||||||||||||||||||
|
Changes in
|
|||||||||||||||||
|
Net Unrealized Gain on Securities
|
OTTI Losses in OCI
|
Net Gain on Cash Flow Hedging Instruments
|
Foreign Currency Translation Adjustments
|
Pension and Other Postretirement Plan Adjustments
|
AOCI, net of tax
|
||||||||||||
Beginning balance
|
$
|
1,279
|
|
$
|
(7
|
)
|
$
|
130
|
|
$
|
(55
|
)
|
$
|
(1,676
|
)
|
$
|
(329
|
)
|
OCI before reclassifications
|
1,191
|
|
(6
|
)
|
95
|
|
(13
|
)
|
—
|
|
1,267
|
|
||||||
Amounts reclassified from AOCI
|
(33
|
)
|
3
|
|
(25
|
)
|
—
|
|
17
|
|
(38
|
)
|
||||||
OCI, net of tax
|
1,158
|
|
(3
|
)
|
70
|
|
(13
|
)
|
17
|
|
1,229
|
|
||||||
Ending balance
|
$
|
2,437
|
|
$
|
(10
|
)
|
$
|
200
|
|
$
|
(68
|
)
|
$
|
(1,659
|
)
|
$
|
900
|
|
Reclassifications of AOCI
|
|||||||
|
Three Months Ended June 30, 2016
|
Six Months Ended June 30, 2016
|
Affected Line Item in the Condensed Consolidated Statement of Operations
|
||||
Net Unrealized Gain on Securities
|
|
|
|
||||
Available-for-sale securities
|
$
|
92
|
|
$
|
51
|
|
Net realized capital gains (losses)
|
|
92
|
|
51
|
|
Income before income taxes
|
||
|
32
|
|
18
|
|
Income tax expense (benefit)
|
||
|
$
|
60
|
|
$
|
33
|
|
Net income
|
OTTI Losses in OCI
|
|
|
|
||||
Other than temporary impairments
|
$
|
(3
|
)
|
$
|
(4
|
)
|
Net realized capital gains (losses)
|
|
(3
|
)
|
(4
|
)
|
Income (loss) before income taxes
|
||
|
(1
|
)
|
(1
|
)
|
Income tax expense (benefit)
|
||
|
$
|
(2
|
)
|
$
|
(3
|
)
|
Net income (loss)
|
Net Gains on Cash Flow Hedging Instruments
|
|
|
|
||||
Interest rate swaps
|
$
|
2
|
|
$
|
7
|
|
Net realized capital gains (losses)
|
Interest rate swaps
|
15
|
|
30
|
|
Net investment income
|
||
Foreign currency swaps
|
(2
|
)
|
2
|
|
Net realized capital gains (losses)
|
||
|
15
|
|
39
|
|
Income before income taxes
|
||
|
5
|
|
14
|
|
Income tax expense (benefit)
|
||
|
$
|
10
|
|
$
|
25
|
|
Net income
|
Pension and Other Postretirement Plan Adjustments
|
|
|
|
||||
Amortization of prior service credit
|
$
|
1
|
|
$
|
3
|
|
Insurance operating costs and other expenses
|
Amortization of actuarial loss
|
(14
|
)
|
(29
|
)
|
Insurance operating costs and other expenses
|
||
|
(13
|
)
|
(26
|
)
|
Income (loss) before income taxes
|
||
|
(5
|
)
|
(9
|
)
|
Income tax expense (benefit)
|
||
|
$
|
(8
|
)
|
$
|
(17
|
)
|
Net income (loss)
|
Total amounts reclassified from AOCI
|
$
|
60
|
|
$
|
38
|
|
Net income
|
Components of Net Periodic Cost (Benefit)
|
||||||||||||
|
Pension Benefits
|
Other Postretirement Benefits
|
||||||||||
|
Three Months Ended June 30,
|
Three Months Ended June 30,
|
||||||||||
|
2017
|
2016
|
2017
|
2016
|
||||||||
Service cost
|
$
|
1
|
|
$
|
1
|
|
$
|
—
|
|
$
|
—
|
|
Interest cost
|
49
|
|
59
|
|
2
|
|
3
|
|
||||
Expected return on plan assets
|
(80
|
)
|
(76
|
)
|
(2
|
)
|
(3
|
)
|
||||
Amortization of prior service credit
|
—
|
|
—
|
|
(2
|
)
|
(1
|
)
|
||||
Amortization of actuarial loss
|
15
|
|
13
|
|
1
|
|
1
|
|
||||
Settlements
|
750
|
|
—
|
|
—
|
|
—
|
|
||||
Net periodic cost (benefit)
|
$
|
735
|
|
$
|
(3
|
)
|
$
|
(1
|
)
|
$
|
—
|
|
Components of Net Periodic Cost (Benefit)
|
||||||||||||
|
Pension Benefits
|
Other Postretirement Benefits
|
||||||||||
|
Six months ended June 30,
|
Six months ended June 30,
|
||||||||||
|
2017
|
2016
|
2017
|
2016
|
||||||||
Service cost
|
$
|
2
|
|
$
|
1
|
|
$
|
—
|
|
$
|
—
|
|
Interest cost
|
98
|
|
118
|
|
4
|
|
6
|
|
||||
Expected return on plan assets
|
(159
|
)
|
(153
|
)
|
(4
|
)
|
(5
|
)
|
||||
Amortization of prior service credit
|
—
|
|
—
|
|
(3
|
)
|
(3
|
)
|
||||
Amortization of actuarial loss
|
30
|
|
27
|
|
2
|
|
2
|
|
||||
Settlements
|
750
|
|
—
|
|
—
|
|
—
|
|
||||
Net periodic cost (benefit)
|
$
|
721
|
|
$
|
(7
|
)
|
$
|
(1
|
)
|
$
|
—
|
|
Description
|
Page
|
Key Performance Measures and Ratios
|
|
Commercial
Lines
|
|
Personal Lines
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
|
2017
|
2016
|
|
2017
|
2016
|
||||||||
Net income (loss)
|
$
|
(40
|
)
|
$
|
216
|
|
|
$
|
338
|
|
$
|
539
|
|
Less: Unlock benefit, before tax
|
20
|
|
18
|
|
|
38
|
|
31
|
|
||||
Less: Net realized capital gains (losses) after DAC, excluded from core earnings, before tax
|
75
|
|
51
|
|
|
55
|
|
(97
|
)
|
||||
Less: Pension settlement, before tax
|
(750
|
)
|
—
|
|
|
(750
|
)
|
—
|
|
||||
Less: Income tax benefit [1]
|
226
|
|
25
|
|
|
228
|
|
98
|
|
||||
Core earnings
|
$
|
389
|
|
$
|
122
|
|
|
$
|
767
|
|
$
|
507
|
|
Net Income (Loss)
|
Net Income (Loss) per Diluted Share
|
Book Value per Diluted Share
|
Net Investment Income
|
Investment Yield After-tax
|
Written Premiums
|
Combined Ratio
|
Net Income Margin - Group Benefits
|
Net Income - Talcott Resolution
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||
|
2017
|
2016
|
Change
|
|
2017
|
2016
|
Change
|
||||||||||
Earned premiums
|
$
|
3,490
|
|
$
|
3,444
|
|
1
|
%
|
|
$
|
6,963
|
|
$
|
6,848
|
|
2
|
%
|
Fee income
|
466
|
|
441
|
|
6
|
%
|
|
921
|
|
886
|
|
4
|
%
|
||||
Net investment income
|
715
|
|
735
|
|
(3
|
%)
|
|
1,443
|
|
1,431
|
|
1
|
%
|
||||
Net realized capital gains (losses)
|
75
|
|
53
|
|
42
|
%
|
|
55
|
|
(102
|
)
|
154
|
%
|
||||
Other revenues
|
23
|
|
23
|
|
—
|
%
|
|
42
|
|
43
|
|
(2
|
%)
|
||||
Total revenues
|
4,769
|
|
4,696
|
|
2
|
%
|
|
9,424
|
|
9,106
|
|
3
|
%
|
||||
Benefits, losses and loss adjustment expenses
|
2,767
|
|
3,142
|
|
(12
|
%)
|
|
5,524
|
|
5,783
|
|
(4
|
%)
|
||||
Amortization of deferred policy acquisition costs
|
368
|
|
368
|
|
—
|
%
|
|
731
|
|
742
|
|
(1
|
%)
|
||||
Insurance operating costs and other expenses
|
1,692
|
|
931
|
|
82
|
%
|
|
2,657
|
|
1,859
|
|
43
|
%
|
||||
Interest expense
|
81
|
|
85
|
|
(5
|
%)
|
|
164
|
|
171
|
|
(4
|
%)
|
||||
Total benefits, losses and expenses
|
4,908
|
|
4,526
|
|
8
|
%
|
|
9,076
|
|
8,555
|
|
6
|
%
|
||||
Income (loss) before income taxes
|
(139
|
)
|
170
|
|
(182
|
%)
|
|
348
|
|
551
|
|
(37
|
%)
|
||||
Income tax expense (benefit)
|
(99
|
)
|
(46
|
)
|
(115
|
%)
|
|
10
|
|
12
|
|
(17
|
%)
|
||||
Net income (loss)
|
$
|
(40
|
)
|
$
|
216
|
|
(119
|
%)
|
|
$
|
338
|
|
$
|
539
|
|
(37
|
%)
|
•
|
Current accident year losses and loss adjustment expenses before catastrophes in Property & Casualty increased
$19
, before tax, primarily resulting from the effect of Commercial Lines earned premium growth in Small Commercial, higher loss costs in Small Commercial automobile and Middle Market commercial property and higher loss costs in homeowners, partially offset by the effect of lower Personal Lines earned premium and lower Personal Lines auto liability loss costs.
|
•
|
Current accident year catastrophe losses of
$155
, before tax, for the
three months ended
June 30, 2017
, compared to
$184
, before tax, for the prior year period. Catastrophe losses in 2017 were primarily due to multiple wind and hail events across various U.S. geographic regions, primarily in the Midwest, Texas and Colorado. Catastrophe losses in 2016 were primarily due to multiple wind and hail events across various U.S. geographic regions, concentrated in Texas and the plains. For additional information, see MD&A -
|
•
|
Net prior accident year reserve development in Property & Casualty was favorable
$10
, before tax, for the
three months ended
June 30, 2017
, compared to unfavorable reserve development of
$351
, before tax, for the prior year period.
Prior accident year development in 2016 was largely due to a
$268
increase in asbestos and environmental reserves and a
$75
increase in Personal Lines auto liability reserves. For additional information, see MD&A - Critical Accounting Estimates, Reserve Roll Forwards and Development.
|
•
|
Losses and loss adjustment expenses before catastrophes in Property & Casualty increased
$86
, before tax, primarily resulting from the effect of Commercial Lines earned premium growth in Small Commercial and higher loss costs in Small Commercial automobile, Middle Market commercial property and Personal Lines homeowners, partially offset by the effect of lower Personal Lines earned premium.
|
•
|
Current accident year catastrophe losses of
$305
, before tax, for the
six months ended June 30,
2017
, compared to
$275
, before tax, for the prior year period. Catastrophe losses in 2017 were primarily due to multiple wind and hail events across various U.S. geographic regions, primarily in the Midwest, Colorado, Texas and the Southeast. Catastrophe losses in 2016 were primarily due to multiple wind and hail and winter storm events across various U.S. geographic regions, concentrated in Texas and the central and southern plains and, to a lesser extent, winter storms. For additional information, see MD&A - Critical Accounting Estimates, Property & Casualty Insurance Product Reserves, Net of Reinsurance.
|
•
|
Unfavorable prior accident year reserve development in Property & Casualty of
$2
, before tax, for the
six months ended June 30,
2017
, compared to unfavorable reserve development of
$384
, before tax, for the prior year period. Prior accident year development in 2016 was largely due to a
$268
increase in asbestos and environmental reserves and a
|
|
June 30, 2017
|
|
December 31, 2016
|
||||||||
|
Amount
|
Percent
|
|
Amount
|
Percent
|
||||||
Fixed maturities, available-for-sale ("AFS"), at fair value
|
$
|
57,834
|
|
78.4
|
%
|
|
$
|
56,003
|
|
79.3
|
%
|
Fixed maturities, at fair value using the fair value option ("FVO")
|
146
|
|
0.2
|
%
|
|
293
|
|
0.4
|
%
|
||
Equity securities, AFS, at fair value
|
1,055
|
|
1.4
|
%
|
|
1,097
|
|
1.6
|
%
|
||
Mortgage loans
|
5,796
|
|
7.9
|
%
|
|
5,697
|
|
8.1
|
%
|
||
Policy loans, at outstanding balance
|
1,433
|
|
1.9
|
%
|
|
1,444
|
|
1.9
|
%
|
||
Limited partnerships and other alternative investments
|
2,445
|
|
3.3
|
%
|
|
2,456
|
|
3.5
|
%
|
||
Other investments [1]
|
355
|
|
0.5
|
%
|
|
403
|
|
0.6
|
%
|
||
Short-term investments
|
4,716
|
|
6.4
|
%
|
|
3,244
|
|
4.6
|
%
|
||
Total investments
|
$
|
73,780
|
|
100.0
|
%
|
|
$
|
70,637
|
|
100.0
|
%
|
[1]
|
Primarily relates to derivative instruments.
|
Net Investment Income
|
|||||||||||||||||||||
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||
|
2017
|
2016
|
|
2017
|
2016
|
||||||||||||||||
(Before tax)
|
Amount
|
Yield [1]
|
Amount
|
Yield [1]
|
|
Amount
|
Yield [1]
|
Amount
|
Yield [1]
|
||||||||||||
Fixed maturities [2]
|
$
|
580
|
|
4.2
|
%
|
$
|
604
|
|
4.3
|
%
|
|
$
|
1,155
|
|
4.2
|
%
|
$
|
1,199
|
|
4.2
|
%
|
Equity securities
|
8
|
|
2.6
|
%
|
6
|
|
2.6
|
%
|
|
13
|
|
2.3
|
%
|
17
|
|
3.7
|
%
|
||||
Mortgage loans
|
61
|
|
4.2
|
%
|
60
|
|
4.3
|
%
|
|
123
|
|
4.3
|
%
|
120
|
|
4.3
|
%
|
||||
Policy loans
|
20
|
|
5.7
|
%
|
20
|
|
5.7
|
%
|
|
39
|
|
5.4
|
%
|
42
|
|
5.9
|
%
|
||||
Limited partnerships and other alternative investments
|
48
|
|
8.0
|
%
|
40
|
|
6.1
|
%
|
|
118
|
|
9.9
|
%
|
48
|
|
3.6
|
%
|
||||
Other [3]
|
26
|
|
|
34
|
|
|
|
55
|
|
|
61
|
|
|
||||||||
Investment expense
|
(28
|
)
|
|
(29
|
)
|
|
|
(60
|
)
|
|
(56
|
)
|
|
||||||||
Total net investment income
|
$
|
715
|
|
4.2
|
%
|
$
|
735
|
|
4.2
|
%
|
|
$
|
1,443
|
|
4.2
|
%
|
$
|
1,431
|
|
4.1
|
%
|
Total net investment income excluding limited partnerships and other alternative investments
|
$
|
667
|
|
4.1
|
%
|
$
|
695
|
|
4.1
|
%
|
|
$
|
1,325
|
|
4.0
|
%
|
$
|
1,383
|
|
4.1
|
%
|
[1]
|
Yields calculated using annualized net investment income divided by the monthly average invested assets at cost, amortized cost, or adjusted carrying value, as applicable, excluding repurchase agreement and securities lending collateral , if any, and derivatives book value.
|
[2]
|
Includes net investment income on short-term investments.
|
[3]
|
Primarily includes income from derivatives that qualify for hedge accounting and hedge fixed maturities.
|
Net Realized Capital Gains (Losses)
|
||||||||||||
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
||||||||||
(Before tax)
|
2017
|
2016
|
2017
|
2016
|
||||||||
Gross gains on sales
|
$
|
140
|
|
$
|
124
|
|
$
|
252
|
|
$
|
214
|
|
Gross losses on sales
|
(31
|
)
|
(25
|
)
|
(106
|
)
|
(133
|
)
|
||||
Net other-than-temporary impairment ("OTTI") losses recognized in earnings [1]
|
(14
|
)
|
(7
|
)
|
(15
|
)
|
(30
|
)
|
||||
Valuation allowances on mortgage loans [2]
|
2
|
|
—
|
|
2
|
|
—
|
|
||||
Results of variable annuity hedge program
|
|
|
|
|
|
|
|
|
||||
GMWB derivatives, net
|
20
|
|
3
|
|
38
|
|
(14
|
)
|
||||
Macro hedge program
|
(38
|
)
|
(20
|
)
|
(124
|
)
|
(34
|
)
|
||||
Total results of variable annuity hedge program
|
(18
|
)
|
(17
|
)
|
(86
|
)
|
(48
|
)
|
||||
Transactional foreign currency revaluation
|
13
|
|
(87
|
)
|
—
|
|
(131
|
)
|
||||
Non-qualifying foreign currency derivatives
|
(17
|
)
|
82
|
|
(6
|
)
|
121
|
|
||||
Other, net [2]
|
—
|
|
(17
|
)
|
14
|
|
(95
|
)
|
||||
Net realized capital gains (losses)
|
$
|
75
|
|
$
|
53
|
|
$
|
55
|
|
$
|
(102
|
)
|
[1]
|
See Other-Than-Temporary Impairments within the Investment Portfolio Risks and Risk Management section of the MD&A.
|
[2]
|
Primarily consists of changes in value of non-qualifying derivatives, including credit derivatives, interest rate derivatives used to manage duration, and embedded derivatives associated with modified coinsurance reinsurance contracts.
|
•
|
property and casualty insurance product reserves, net of reinsurance;
|
•
|
group benefit long-term disability (LTD) reserves, net of reinsurance;
|
•
|
estimated gross profits used in the valuation and amortization of assets and liabilities associated with variable annuity and other universal life-type contracts;
|
•
|
living benefits required to be fair valued (in other policyholder funds and benefits payable);
|
•
|
evaluation of goodwill for impairment;
|
•
|
valuation of investments and derivative instruments including evaluation of other-than-temporary impairments on available-for-sale securities and valuation allowances on mortgage loans;
|
•
|
valuation allowance on deferred tax assets; and
|
•
|
contingencies relating to corporate litigation and regulatory matters.
|
|
Commercial
Lines
|
Personal
Lines
|
Property & Casualty Other Operations
|
Total Property & Casualty Insurance
|
||||||||
Beginning liabilities for unpaid losses and loss adjustment expenses, gross
|
$
|
17,238
|
|
$
|
2,094
|
|
$
|
2,501
|
|
$
|
21,833
|
|
Reinsurance and other recoverables
|
2,325
|
|
25
|
|
426
|
|
2,776
|
|
||||
Beginning liabilities for unpaid losses and loss adjustment expenses, net
|
14,913
|
|
2,069
|
|
2,075
|
|
19,057
|
|
||||
Provision for unpaid losses and loss adjustment expenses
|
|
|
|
|
||||||||
Current accident year before catastrophes
|
1,962
|
|
1,296
|
|
—
|
|
3,258
|
|
||||
Current accident year ("CAY") catastrophes ("CATS")
|
134
|
|
171
|
|
—
|
|
305
|
|
||||
Prior accident year development ("PYD")
|
15
|
|
(14
|
)
|
1
|
|
2
|
|
||||
Total provision for unpaid losses and loss adjustment expenses
|
2,111
|
|
1,453
|
|
1
|
|
3,565
|
|
||||
Less: payments
|
1,737
|
|
1,431
|
|
133
|
|
3,301
|
|
||||
Ending liabilities for unpaid losses and loss adjustment expenses, net
|
15,287
|
|
2,091
|
|
1,943
|
|
19,321
|
|
||||
Reinsurance and other recoverables
|
2,384
|
|
24
|
|
401
|
|
2,809
|
|
||||
Ending liabilities for unpaid losses and loss adjustment expenses, gross
|
$
|
17,671
|
|
$
|
2,115
|
|
$
|
2,344
|
|
$
|
22,130
|
|
Earned premiums
|
$
|
3,427
|
|
$
|
1,886
|
|
|
|
||||
Loss and loss expense paid ratio [1]
|
50.7
|
|
75.9
|
|
|
|
||||||
Loss and loss expense incurred ratio
|
61.9
|
|
78.0
|
|
|
|
||||||
Prior accident year development (pts) [2]
|
0.4
|
|
(0.8
|
)
|
|
|
[1]
|
The “loss and loss expense paid ratio” represents the ratio of paid losses and loss adjustment expenses to earned premiums.
|
[2]
|
“Prior accident year development (pts)” represents the ratio of prior accident year development to earned premiums.
|
|
Commercial Lines
|
Personal
Lines
|
Total Property & Casualty Insurance
|
||||||
Workers’ compensation discount accretion
|
$
|
8
|
|
$
|
—
|
|
$
|
8
|
|
Commercial property
|
(7
|
)
|
—
|
|
(7
|
)
|
|||
Catastrophes
|
(2
|
)
|
(8
|
)
|
(10
|
)
|
|||
Other reserve re-estimates, net
|
1
|
|
(2
|
)
|
(1
|
)
|
|||
Total prior accident year development
|
$
|
—
|
|
$
|
(10
|
)
|
$
|
(10
|
)
|
|
Commercial
Lines
|
Personal
Lines
|
Property & Casualty Other Operations
|
Total Property & Casualty Insurance
|
||||||||
Beginning liabilities for unpaid losses and loss adjustment expenses, gross
|
$
|
16,559
|
|
$
|
1,845
|
|
$
|
3,421
|
|
$
|
21,825
|
|
Reinsurance and other recoverables
|
2,293
|
|
19
|
|
570
|
|
2,882
|
|
||||
Beginning liabilities for unpaid losses and loss adjustment expenses, net
|
14,266
|
|
1,826
|
|
2,851
|
|
18,943
|
|
||||
Provision for unpaid losses and loss adjustment expenses
|
|
|
|
|
||||||||
Current accident year before catastrophes
|
1,851
|
|
1,321
|
|
—
|
|
3,172
|
|
||||
Current accident year catastrophes
|
124
|
|
151
|
|
—
|
|
275
|
|
||||
Prior accident year development
|
(14
|
)
|
128
|
|
270
|
|
384
|
|
||||
Total provision for unpaid losses and loss adjustment expenses
|
1,961
|
|
1,600
|
|
270
|
|
3,831
|
|
||||
Less: payments
|
1,739
|
|
1,471
|
|
406
|
|
3,616
|
|
||||
Ending liabilities for unpaid losses and loss adjustment expenses, net
|
14,488
|
|
1,955
|
|
2,715
|
|
19,158
|
|
||||
Reinsurance and other recoverables
|
2,184
|
|
18
|
|
544
|
|
2,746
|
|
||||
Ending liabilities for unpaid losses and loss adjustment expenses, gross
|
$
|
16,672
|
|
$
|
1,973
|
|
$
|
3,259
|
|
$
|
21,904
|
|
Earned premiums
|
$
|
3,273
|
|
$
|
1,951
|
|
|
|
||||
Loss and loss expense paid ratio [1]
|
53.1
|
|
75.4
|
|
|
|
||||||
Loss and loss expense incurred ratio
|
59.9
|
|
82.0
|
|
|
|
||||||
Prior accident year development (pts) [2]
|
(0.4
|
)
|
6.6
|
|
|
|
[1]
|
The “loss and loss expense paid ratio” represents the ratio of paid losses and loss adjustment expenses to earned premiums.
|
[2]
|
“Prior accident year development (pts)” represents the ratio of prior accident year development to earned premiums.
|
[1]
|
These amounts represent an aggregation of multiple catastrophes.
|
|
Commercial Lines
|
Personal
Lines
|
Property & Casualty Other Operations
|
Total Property & Casualty Insurance
|
||||||||
Workers’ compensation
|
$
|
(4
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
(4
|
)
|
Workers’ compensation discount accretion
|
7
|
|
—
|
|
—
|
|
7
|
|
||||
General liability
|
34
|
|
—
|
|
—
|
|
34
|
|
||||
Package business
|
7
|
|
—
|
|
—
|
|
7
|
|
||||
Commercial property
|
(1
|
)
|
—
|
|
—
|
|
(1
|
)
|
||||
Automobile liability
|
(8
|
)
|
75
|
|
—
|
|
67
|
|
||||
Homeowners
|
—
|
|
1
|
|
—
|
|
1
|
|
||||
Net asbestos reserves
|
—
|
|
—
|
|
197
|
|
197
|
|
||||
Net environmental reserves
|
—
|
|
—
|
|
71
|
|
71
|
|
||||
Catastrophes
|
1
|
|
1
|
|
—
|
|
2
|
|
||||
Uncollectible reinsurance
|
(30
|
)
|
—
|
|
—
|
|
(30
|
)
|
||||
Other reserve re-estimates, net
|
—
|
|
(1
|
)
|
1
|
|
—
|
|
||||
Total prior accident year development
|
$
|
6
|
|
$
|
76
|
|
$
|
269
|
|
$
|
351
|
|
|
Asbestos
|
Environmental
|
||||
June 30, 2017
|
|
|
||||
Property and Casualty Other Operations
|
$
|
1,213
|
|
$
|
202
|
|
Commercial Lines and Personal Lines
|
75
|
|
57
|
|
||
Ending liability — net
|
$
|
1,288
|
|
$
|
259
|
|
December 31, 2016
|
|
|
||||
Property and Casualty Other Operations
|
$
|
1,282
|
|
$
|
234
|
|
Commercial Lines and Personal Lines
|
81
|
|
58
|
|
||
Ending liability — net
|
$
|
1,363
|
|
$
|
292
|
|
|
|
Asbestos
|
Environmental
|
Total A&E
|
||||||
Gross
|
|
|
|
|||||||
|
Direct
|
$
|
1,482
|
|
$
|
275
|
|
$
|
1,757
|
|
|
Assumed Reinsurance
|
153
|
|
5
|
|
158
|
|
|||
|
Total
|
1,635
|
|
280
|
|
1,915
|
|
|||
Ceded
|
(347
|
)
|
(21
|
)
|
(368
|
)
|
||||
Net
|
$
|
1,288
|
|
$
|
259
|
|
$
|
1,547
|
|
|
Asbestos
|
Environmental
|
||||
2017
|
|
|
||||
Beginning liability—net
|
$
|
1,363
|
|
$
|
292
|
|
Reclassification of allowance for uncollectible reinsurance [1]
|
1
|
|
—
|
|
||
Less: losses and loss adjustment expenses paid
|
76
|
|
33
|
|
||
Ending liability – net
|
$
|
1,288
|
|
$
|
259
|
|
2016
|
|
|
||||
Beginning liability—net
|
$
|
1,803
|
|
$
|
318
|
|
Losses and loss adjustment expenses incurred
|
197
|
|
71
|
|
||
Less: losses and loss adjustment expenses paid
|
350
|
|
22
|
|
||
Ending liability – net
|
$
|
1,650
|
|
$
|
367
|
|
•
|
Direct Insurance-
includes primary and excess coverage. Of the two categories of claims, direct policies tend to have the greatest factual development from which to estimate the Company’s exposures.
|
•
|
Assumed Reinsurance-
includes both “treaty” reinsurance (covering broad categories of claims or blocks of business) and “facultative” reinsurance (covering specific risks or individual policies of primary or excess insurance companies). Assumed Reinsurance exposures are less predictable than direct insurance exposures because the Company does not generally receive notice of a reinsurance claim until the underlying direct insurance claim is mature. This causes a delay in the receipt of information at the reinsurer level and adds to the uncertainty of estimating related reserves.
|
|
Asbestos
|
Environmental
|
One year net survival ratio
|
7.0
|
3.9
|
Three year net survival ratio
|
4.7
|
4.4
|
One year net survival ratio - excluding PPG settlement
|
8.1
|
|
Three year net survival ratio - excluding PPG settlement
|
7.3
|
|
|
Asbestos
|
Environmental
|
||||||||||
|
Paid
Losses & LAE |
Incurred
Losses & LAE |
Paid
Losses & LAE |
Incurred
Losses & LAE |
||||||||
Gross
|
|
|
|
|
||||||||
Direct
|
$
|
72
|
|
$
|
—
|
|
$
|
38
|
|
$
|
—
|
|
Assumed Reinsurance
|
24
|
|
—
|
|
2
|
|
—
|
|
||||
Total
|
96
|
|
—
|
|
40
|
|
—
|
|
||||
Ceded
|
(20
|
)
|
—
|
|
(7
|
)
|
—
|
|
||||
Net
|
$
|
76
|
|
$
|
—
|
|
$
|
33
|
|
$
|
—
|
|
[1]
|
For additional information on death and other insurance benefit reserves, see Note
9
-
Reserve for Future Policy Benefits and Separate Account Liabilities
of Notes to Condensed Consolidated Financial Statements.
|
COMMERCIAL LINES
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||
|
2017
|
2016
|
Change
|
|
2017
|
2016
|
Change
|
||||||||||
Written premiums
|
$
|
1,706
|
|
$
|
1,669
|
|
2
|
%
|
|
$
|
3,527
|
|
$
|
3,395
|
|
4
|
%
|
Change in unearned premium reserve
|
(14
|
)
|
19
|
|
(174
|
%)
|
|
119
|
|
122
|
|
(2
|
%)
|
||||
Earned premiums
|
1,720
|
|
1,650
|
|
4
|
%
|
|
3,408
|
|
3,273
|
|
4
|
%
|
||||
Fee income
|
9
|
|
9
|
|
—
|
%
|
|
19
|
|
19
|
|
—
|
%
|
||||
Losses and loss adjustment expenses
|
|
|
|
|
|
|
|
|
|||||||||
Current accident year before catastrophes
|
994
|
|
938
|
|
6
|
%
|
|
1,962
|
|
1,851
|
|
6
|
%
|
||||
Current accident year catastrophes
|
63
|
|
80
|
|
(21
|
%)
|
|
134
|
|
124
|
|
8
|
%
|
||||
Prior accident year development
|
—
|
|
6
|
|
(100
|
%)
|
|
15
|
|
(14
|
)
|
NM
|
|
||||
Total losses and loss adjustment expenses
|
1,057
|
|
1,024
|
|
3
|
%
|
|
2,111
|
|
1,961
|
|
8
|
%
|
||||
Amortization of deferred policy acquisition costs
|
252
|
|
242
|
|
4
|
%
|
|
501
|
|
484
|
|
4
|
%
|
||||
Underwriting expenses
|
324
|
|
307
|
|
6
|
%
|
|
647
|
|
612
|
|
6
|
%
|
||||
Dividends to policyholders
|
3
|
|
4
|
|
(25
|
%)
|
|
7
|
|
8
|
|
(13
|
%)
|
||||
Underwriting gain
|
93
|
|
82
|
|
13
|
%
|
|
161
|
|
227
|
|
(29
|
%)
|
||||
Net servicing income
|
1
|
|
—
|
|
NM
|
|
|
1
|
|
—
|
|
NM
|
|
||||
Net investment income [1]
|
240
|
|
226
|
|
6
|
%
|
|
483
|
|
435
|
|
11
|
%
|
||||
Net realized capital gains (losses) [1]
|
32
|
|
25
|
|
28
|
%
|
|
43
|
|
(8
|
)
|
NM
|
|
||||
Other income
|
—
|
|
—
|
|
—
|
%
|
|
1
|
|
1
|
|
—
|
%
|
||||
Income before income taxes
|
366
|
|
333
|
|
10
|
%
|
|
689
|
|
655
|
|
5
|
%
|
||||
Income tax expense [2]
|
108
|
|
96
|
|
13
|
%
|
|
200
|
|
193
|
|
4
|
%
|
||||
Net income
|
$
|
258
|
|
$
|
237
|
|
9
|
%
|
|
$
|
489
|
|
$
|
462
|
|
6
|
%
|
[1]
|
For discussion of consolidated investment results, see MD&A - Investment Results, Net Investment Income (Loss) and Net Realized Capital Gains (Losses).
|
[2]
|
For discussion of income taxes, see Note
11
-
Income Taxes
of Notes to Condensed Consolidated Financial Statements.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
|
2017
|
2016
|
|
2017
|
2016
|
||||||||
New business premium
|
$
|
277
|
|
$
|
287
|
|
|
$
|
590
|
|
$
|
562
|
|
Standard commercial lines policy count retention
|
83
|
%
|
83
|
%
|
|
84
|
%
|
83
|
%
|
||||
Standard commercial lines renewal written price increase
|
3.5
|
%
|
2.2
|
%
|
|
3.4
|
%
|
2.2
|
%
|
||||
Standard commercial lines renewal earned price increase
|
2.7
|
%
|
2.4
|
%
|
|
2.6
|
%
|
2.4
|
%
|
||||
Standard commercial lines policies in-force as of end of period (in thousands)
|
|
|
|
1,344
|
|
1,320
|
|
[1]
|
Standard commercial lines consists of Small Commercial and Middle Market. Standard Commercial premium measures exclude Middle Market programs and livestock lines of business.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
|
2017
|
2016
|
Change
|
|
2017
|
2016
|
Change
|
||||||
Loss and loss adjustment expense ratio
|
|
|
|
|
|
|
|
||||||
Current accident year before catastrophes
|
57.8
|
|
56.8
|
|
1.0
|
|
|
57.6
|
|
56.6
|
|
1.0
|
|
Current accident year catastrophes
|
3.7
|
|
4.8
|
|
(1.1
|
)
|
|
3.9
|
|
3.8
|
|
0.1
|
|
Prior accident year development
|
—
|
|
0.4
|
|
(0.4
|
)
|
|
0.4
|
|
(0.4
|
)
|
0.8
|
|
Total loss and loss adjustment expense ratio
|
61.5
|
|
62.1
|
|
(0.6
|
)
|
|
61.9
|
|
59.9
|
|
2.0
|
|
Expense ratio
|
33.0
|
|
32.7
|
|
0.3
|
|
|
33.1
|
|
32.9
|
|
0.2
|
|
Policyholder dividend ratio
|
0.2
|
|
0.2
|
|
—
|
|
|
0.2
|
|
0.2
|
|
—
|
|
Combined ratio
|
94.6
|
|
95.0
|
|
(0.4
|
)
|
|
95.3
|
|
93.1
|
|
2.2
|
|
Current accident year catastrophes and prior year development
|
3.7
|
|
5.2
|
|
(1.5
|
)
|
|
4.3
|
|
3.4
|
|
0.9
|
|
Underlying combined ratio
|
90.9
|
|
89.8
|
|
1.1
|
|
|
90.9
|
|
89.7
|
|
1.2
|
|
•
|
Small Commercial written premium growth for both the three and six month periods was primarily due to higher renewal premium driven by renewal written price increases and growth from the acquisition of Maxum, partially offset by lower new business premium, excluding Maxum, and, for the three month period, the effect of lower policy retention.
|
•
|
Middle Market written premiums declined for the
three months ended
June 30, 2017
due to lower new business premium, partially offset by the effect of renewal written price increases. For the six month period, Middle Market written premium growth was primarily driven by higher new business and audit premium and renewal written pricing increases.
|
•
|
Specialty Commercial written premium declined for the three months ended June 30, 2017 primarily due to a decline in National Accounts. For the six month period, Specialty Commercial written premium growth was primarily due to higher new and renewal premium in Bond, partially offset by a decline in National Accounts.
|
•
|
For the
three months ended
June 30, 2017
, renewal written price increases averaged
3.5%
in standard commercial, which included 4.7% for Small Commercial and 1.3% for Middle Market.
|
PERSONAL LINES
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||
Underwriting Summary
|
2017
|
2016
|
Change
|
|
2017
|
2016
|
Change
|
||||||||||
Written premiums
|
$
|
925
|
|
$
|
992
|
|
(7
|
%)
|
|
$
|
1,814
|
|
$
|
1,945
|
|
(7
|
%)
|
Change in unearned premium reserve
|
(5
|
)
|
16
|
|
(131
|
%)
|
|
(50
|
)
|
(6
|
)
|
NM
|
|
||||
Earned premiums
|
930
|
|
976
|
|
(5
|
%)
|
|
1,864
|
|
1,951
|
|
(4
|
%)
|
||||
Fee income
|
11
|
|
10
|
|
10
|
%
|
|
22
|
|
19
|
|
16
|
%
|
||||
Losses and loss adjustment expenses
|
|
|
|
|
|
|
|
||||||||||
Current accident year before catastrophes
|
652
|
|
689
|
|
(5
|
%)
|
|
1,296
|
|
1,321
|
|
(2
|
%)
|
||||
Current accident year catastrophes
|
92
|
|
104
|
|
(12
|
%)
|
|
171
|
|
151
|
|
13
|
%
|
||||
Prior accident year development
|
(10
|
)
|
76
|
|
(113
|
%)
|
|
(14
|
)
|
128
|
|
(111
|
%)
|
||||
Total losses and loss adjustment expenses
|
734
|
|
869
|
|
(16
|
%)
|
|
1,453
|
|
1,600
|
|
(9
|
%)
|
||||
Amortization of DAC
|
79
|
|
89
|
|
(11
|
%)
|
|
160
|
|
178
|
|
(10
|
%)
|
||||
Underwriting expenses
|
141
|
|
151
|
|
(7
|
%)
|
|
279
|
|
314
|
|
(11
|
%)
|
||||
Underwriting loss
|
(13
|
)
|
(123
|
)
|
89
|
%
|
|
(6
|
)
|
(122
|
)
|
95
|
%
|
||||
Net servicing income [1]
|
4
|
|
5
|
|
(20
|
%)
|
|
7
|
|
9
|
|
(22
|
%)
|
||||
Net investment income [2]
|
35
|
|
33
|
|
6
|
%
|
|
71
|
|
64
|
|
11
|
%
|
||||
Net realized capital gains (losses) [2]
|
5
|
|
4
|
|
25
|
%
|
|
7
|
|
(1
|
)
|
NM
|
|
||||
Other expense
|
(1
|
)
|
—
|
|
NM
|
|
|
(2
|
)
|
—
|
|
NM
|
|
||||
Income (loss) before income taxes
|
30
|
|
(81
|
)
|
137
|
%
|
|
77
|
|
(50
|
)
|
NM
|
|
||||
Income tax expense (benefit) [3]
|
6
|
|
(31
|
)
|
119
|
%
|
|
20
|
|
(23
|
)
|
187
|
%
|
||||
Net income (loss)
|
$
|
24
|
|
$
|
(50
|
)
|
148
|
%
|
|
$
|
57
|
|
$
|
(27
|
)
|
NM
|
|
[1]
|
Includes servicing revenues of
$23
and
$23
for the
three months ended
June 30, 2017
and
2016
, and
$42
and
$43
for the
six months ended
June 30, 2017
, respectively.
|
[2]
|
For discussion of consolidated investment results, see MD&A - Investment Results, Net Investment Income (Loss) and Net Realized Capital Gains (Losses).
|
[3]
|
For discussion of income taxes, see Note
11
-
Income Taxes
of Notes to Condensed Consolidated Financial Statements.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||
Written Premiums
|
2017
|
2016
|
Change
|
|
2017
|
2016
|
Change
|
||||||||||
Product Line
|
|
|
|
|
|
|
|
||||||||||
Automobile
|
$
|
638
|
|
$
|
686
|
|
(7
|
%)
|
|
$
|
1,283
|
|
$
|
1,376
|
|
(7
|
%)
|
Homeowners
|
287
|
|
306
|
|
(6
|
%)
|
|
531
|
|
569
|
|
(7
|
%)
|
||||
Total
|
$
|
925
|
|
$
|
992
|
|
(7
|
%)
|
|
$
|
1,814
|
|
$
|
1,945
|
|
(7
|
%)
|
Earned Premiums
|
|
|
|
|
|
|
|
|
|||||||||
Product Line
|
|
|
|
|
|
|
|
|
|||||||||
Automobile
|
$
|
652
|
|
$
|
680
|
|
(4
|
%)
|
|
$
|
1,306
|
|
$
|
1,358
|
|
(4
|
%)
|
Homeowners
|
278
|
|
296
|
|
(6
|
%)
|
|
558
|
|
593
|
|
(6
|
%)
|
||||
Total
|
$
|
930
|
|
$
|
976
|
|
(5
|
%)
|
|
$
|
1,864
|
|
$
|
1,951
|
|
(4
|
%)
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
Premium Measures
|
2017
|
2016
|
|
2017
|
2016
|
||||||||
Policies in-force end of period (in thousands)
|
|
|
|
|
|
||||||||
Automobile
|
|
|
|
1,839
|
|
2,053
|
|
||||||
Homeowners
|
|
|
|
1,109
|
|
1,239
|
|
||||||
New business written premium
|
|
|
|
|
|
||||||||
Automobile
|
$
|
38
|
|
$
|
83
|
|
|
$
|
80
|
|
$
|
193
|
|
Homeowners
|
$
|
12
|
|
$
|
21
|
|
|
$
|
24
|
|
$
|
44
|
|
Policy count retention
|
|
|
|
|
|
||||||||
Automobile
|
81
|
%
|
84
|
%
|
|
82
|
%
|
84
|
%
|
||||
Homeowners
|
83
|
%
|
84
|
%
|
|
82
|
%
|
84
|
%
|
||||
Renewal written price increase
|
|
|
|
|
|
||||||||
Automobile
|
10.6
|
%
|
6.9
|
%
|
|
10.5
|
%
|
6.5
|
%
|
||||
Homeowners
|
9.2
|
%
|
7.3
|
%
|
|
9.0
|
%
|
7.7
|
%
|
||||
Renewal earned price increase
|
|
|
|
|
|
||||||||
Automobile
|
9.1
|
%
|
5.9
|
%
|
|
8.7
|
%
|
5.8
|
%
|
||||
Homeowners
|
8.5
|
%
|
7.5
|
%
|
|
8.3
|
%
|
7.3
|
%
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
Underwriting Ratios
|
2017
|
2016
|
Change
|
|
2017
|
2016
|
Change
|
||||||
Loss and loss adjustment expense ratio
|
|
|
|
|
|
|
|
||||||
Current accident year before catastrophes
|
70.1
|
|
70.6
|
|
(0.5
|
)
|
|
69.5
|
|
67.7
|
|
1.8
|
|
Current accident year catastrophes
|
9.9
|
|
10.7
|
|
(0.8
|
)
|
|
9.2
|
|
7.7
|
|
1.5
|
|
Prior year development
|
(1.1
|
)
|
7.8
|
|
(8.9
|
)
|
|
(0.8
|
)
|
6.6
|
|
(7.4
|
)
|
Total loss and loss adjustment expense ratio
|
78.9
|
|
89.0
|
|
(10.1
|
)
|
|
78.0
|
|
82.0
|
|
(4.0
|
)
|
Expense ratio
|
22.5
|
|
23.6
|
|
(1.1
|
)
|
|
22.4
|
|
24.2
|
|
(1.8
|
)
|
Combined ratio
|
101.4
|
|
112.6
|
|
(11.2
|
)
|
|
100.3
|
|
106.3
|
|
(6.0
|
)
|
Current accident year catastrophes and prior year development
|
8.8
|
|
18.5
|
|
(9.7
|
)
|
|
8.4
|
|
14.3
|
|
(5.9
|
)
|
Underlying combined ratio
|
92.6
|
|
94.2
|
|
(1.6
|
)
|
|
91.9
|
|
92.0
|
|
(0.1
|
)
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
|
2017
|
2016
|
Change
|
|
2017
|
2016
|
Change
|
||||||
Automobile
|
|
|
|
|
|
|
|
|
|
||||
Combined ratio
|
100.8
|
|
117.0
|
|
(16.2
|
)
|
|
99.1
|
|
111.8
|
|
(12.7
|
)
|
Underlying combined ratio
|
99.1
|
|
102.7
|
|
(3.6
|
)
|
|
97.8
|
|
99.4
|
|
(1.6
|
)
|
Homeowners
|
|
|
|
|
|
|
|
|
|
||||
Combined ratio
|
103.4
|
|
102.4
|
|
1.0
|
|
|
103.4
|
|
93.5
|
|
9.9
|
|
Underlying combined ratio
|
77.6
|
|
74.2
|
|
3.4
|
|
|
78.2
|
|
74.7
|
|
3.5
|
|
PROPERTY & CASUALTY OTHER OPERATIONS
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||
Underwriting Summary
|
2017
|
2016
|
Change
|
|
2017
|
2016
|
Change
|
||||||||||
Losses and loss adjustment expenses
|
|
|
|
|
|
|
|
|
|
||||||||
Prior accident year development
|
$
|
—
|
|
$
|
269
|
|
(100
|
%)
|
|
$
|
1
|
|
$
|
270
|
|
(100
|
%)
|
Total losses and loss adjustment expenses
|
—
|
|
269
|
|
(100
|
%)
|
|
1
|
|
270
|
|
(100
|
%)
|
||||
Underwriting expenses
|
3
|
|
6
|
|
(50
|
%)
|
|
8
|
|
13
|
|
(38
|
%)
|
||||
Underwriting loss
|
(3
|
)
|
(275
|
)
|
99
|
%
|
|
(9
|
)
|
(283
|
)
|
97
|
%
|
||||
Net investment income [1]
|
27
|
|
33
|
|
(18
|
%)
|
|
58
|
|
65
|
|
(11
|
%)
|
||||
Net realized capital gains [1]
|
5
|
|
6
|
|
(17
|
%)
|
|
9
|
|
3
|
|
NM
|
|
||||
Other income
|
—
|
|
—
|
|
—
|
%
|
|
2
|
|
2
|
|
—
|
%
|
||||
Income (loss) before income taxes
|
29
|
|
(236
|
)
|
112
|
%
|
|
60
|
|
(213
|
)
|
128
|
%
|
||||
Income tax expense (benefit) [2]
|
9
|
|
(82
|
)
|
111
|
%
|
|
16
|
|
(76
|
)
|
121
|
%
|
||||
Net income (loss)
|
$
|
20
|
|
$
|
(154
|
)
|
113
|
%
|
|
$
|
44
|
|
$
|
(137
|
)
|
132
|
%
|
[1]
|
For discussion of consolidated investment results, see MD&A - Investment Results, Net Investment Income (Loss) and Net Realized Capital Gains (Losses).
|
GROUP BENEFITS
|
Operating Summary
|
|||||||||||||||||
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||
|
2017
|
2016
|
Change
|
|
2017
|
2016
|
Change
|
||||||||||
Premiums and other considerations
|
$
|
824
|
|
$
|
808
|
|
2
|
%
|
|
$
|
1,659
|
|
$
|
1,603
|
|
3
|
%
|
Net investment income
|
88
|
|
88
|
|
—
|
%
|
|
183
|
|
176
|
|
4
|
%
|
||||
Net realized capital gains (losses) [1]
|
13
|
|
16
|
|
(19
|
)%
|
|
21
|
|
18
|
|
17
|
%
|
||||
Total revenues
|
925
|
|
912
|
|
1
|
%
|
|
1,863
|
|
1,797
|
|
4
|
%
|
||||
Benefits, losses and loss adjustment expenses
|
628
|
|
634
|
|
(1
|
)%
|
|
1,279
|
|
1,252
|
|
2
|
%
|
||||
Amortization of DAC
|
8
|
|
7
|
|
14
|
%
|
|
16
|
|
15
|
|
7
|
%
|
||||
Insurance operating costs and other expenses
|
193
|
|
196
|
|
(2
|
)%
|
|
413
|
|
390
|
|
6
|
%
|
||||
Total benefits, losses and expenses
|
829
|
|
837
|
|
(1
|
)%
|
|
1,708
|
|
1,657
|
|
3
|
%
|
||||
Income before income taxes
|
96
|
|
75
|
|
28
|
%
|
|
155
|
|
140
|
|
11
|
%
|
||||
Income tax expense [2]
|
27
|
|
20
|
|
35
|
%
|
|
41
|
|
35
|
|
17
|
%
|
||||
Net income
|
$
|
69
|
|
$
|
55
|
|
25
|
%
|
|
$
|
114
|
|
$
|
105
|
|
9
|
%
|
[1]
|
For discussion of consolidated investment results, see MD&A - Investment Results, Net Investment Income (Loss) and Net Realized Capital Gains (Losses).
|
[2]
|
For discussion of income taxes, see Note
11
-
Income Taxes
of Notes to the Consolidated Financial Statements.
|
Premiums and Other Considerations
|
|||||||||||||||||
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||
|
2017
|
2016
|
Change
|
|
2017
|
2016
|
Change
|
||||||||||
Fully insured – ongoing premiums
|
$
|
802
|
|
$
|
790
|
|
2
|
%
|
|
$
|
1,607
|
|
$
|
1,562
|
|
3
|
%
|
Buyout premiums
|
3
|
|
—
|
|
NM
|
|
|
14
|
|
6
|
|
133
|
%
|
||||
Fee income
|
19
|
|
18
|
|
6
|
%
|
|
38
|
|
35
|
|
9
|
%
|
||||
Total premiums and other considerations
|
$
|
824
|
|
$
|
808
|
|
2
|
%
|
|
$
|
1,659
|
|
$
|
1,603
|
|
3
|
%
|
Fully insured ongoing sales, excluding buyouts
|
$
|
67
|
|
$
|
80
|
|
(16
|
)%
|
|
$
|
278
|
|
$
|
346
|
|
(20
|
)%
|
Ratios, Excluding Buyouts
|
|||||||||||
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||
|
2017
|
2016
|
Change
|
|
2017
|
2016
|
Change
|
||||
Group disability loss ratio
|
78.9
|
%
|
79.9
|
%
|
1.0
|
|
80.9
|
%
|
81.1
|
%
|
0.2
|
Group life loss ratio
|
74.2
|
%
|
78.1
|
%
|
3.9
|
|
73.6
|
%
|
76.0
|
%
|
2.4
|
Total loss ratio
|
76.1
|
%
|
78.5
|
%
|
2.4
|
|
76.9
|
%
|
78.0
|
%
|
1.1
|
Expense ratio
|
24.5
|
%
|
25.1
|
%
|
0.6
|
|
26.1
|
%
|
25.4
|
%
|
(0.7)
|
Margin
|
|||||||||||||
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
|
2017
|
2016
|
Change
|
|
2017
|
2016
|
Change
|
||||||
Net income margin
|
7.5
|
%
|
6.0
|
%
|
1.5
|
|
|
6.2
|
%
|
5.9
|
%
|
0.3
|
|
Effect of net capital realized gains (losses), net of tax on after-tax margin
|
0.8
|
%
|
0.9
|
%
|
(0.1
|
)
|
|
0.7
|
%
|
0.6
|
%
|
0.1
|
|
Core earnings margin
|
6.7
|
%
|
5.1
|
%
|
1.6
|
|
|
5.5
|
%
|
5.3
|
%
|
0.2
|
|
MUTUAL FUNDS
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||
|
2017
|
2016
|
Change
|
|
2017
|
2016
|
Change
|
||||||||||
Fee income and other revenue
|
$
|
201
|
|
$
|
172
|
|
17
|
%
|
|
$
|
392
|
|
$
|
339
|
|
16
|
%
|
Net investment income
|
—
|
|
1
|
|
(100
|
)%
|
|
1
|
|
1
|
|
—
|
%
|
||||
Total revenues
|
201
|
|
173
|
|
16
|
%
|
|
393
|
|
340
|
|
16
|
%
|
||||
Amortization of DAC
|
5
|
|
6
|
|
(17
|
)%
|
|
11
|
|
11
|
|
—
|
%
|
||||
Operating costs and other expenses
|
158
|
|
135
|
|
17
|
%
|
|
309
|
|
266
|
|
16
|
%
|
||||
Total benefits, losses and expenses
|
163
|
|
141
|
|
16
|
%
|
|
320
|
|
277
|
|
16
|
%
|
||||
Income before income taxes
|
38
|
|
32
|
|
19
|
%
|
|
73
|
|
63
|
|
16
|
%
|
||||
Income tax expense
|
14
|
|
12
|
|
17
|
%
|
|
26
|
|
23
|
|
13
|
%
|
||||
Net income
|
$
|
24
|
|
$
|
20
|
|
20
|
%
|
|
$
|
47
|
|
$
|
40
|
|
18
|
%
|
|
|
|
|
|
|
|
|
||||||||||
Daily Average Total Mutual Funds segment AUM
|
$
|
105,625
|
|
$
|
91,289
|
|
16
|
%
|
|
$
|
103,382
|
|
$
|
89,263
|
|
16
|
%
|
Return on Assets ("ROA") [1]
|
|
|
|
|
|
|
|
||||||||||
Net income
|
9.2
|
|
8.9
|
|
3
|
%
|
|
9.2
|
|
9.1
|
|
1
|
%
|
||||
Core Earnings
|
9.2
|
|
8.9
|
|
3
|
%
|
|
9.2
|
|
9.1
|
|
1
|
%
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||
|
2017
|
2016
|
Change
|
|
2017
|
2016
|
Change
|
||||||||||
Mutual Fund AUM - beginning of period
|
$
|
86,798
|
|
$
|
73,619
|
|
18
|
%
|
|
$
|
81,298
|
|
$
|
74,413
|
|
9
|
%
|
Sales
|
6,248
|
|
4,087
|
|
53
|
%
|
|
13,466
|
|
8,786
|
|
53
|
%
|
||||
Redemptions
|
(4,934
|
)
|
(4,506
|
)
|
(9
|
)%
|
|
(10,819
|
)
|
(9,391
|
)
|
(15
|
)%
|
||||
Net flows
|
1,314
|
|
(419
|
)
|
NM
|
|
|
2,647
|
|
(605
|
)
|
NM
|
|
||||
Change in market value and other
|
3,144
|
|
1,741
|
|
81
|
%
|
|
7,311
|
|
1,133
|
|
NM
|
|
||||
Mutual Fund AUM - end of period
|
$
|
91,256
|
|
$
|
74,941
|
|
22
|
%
|
|
$
|
91,256
|
|
$
|
74,941
|
|
22
|
%
|
Exchange Traded Products AUM [1]
|
325
|
|
|
NM
|
|
|
325
|
|
|
NM
|
|
||||||
Mutual Funds segment AUM before Talcott Resolution
|
91,581
|
|
74,941
|
|
22
|
%
|
|
91,581
|
|
74,941
|
|
NM
|
|
||||
Talcott Resolution AUM [2]
|
16,098
|
|
16,482
|
|
(2
|
)%
|
|
16,098
|
|
16,482
|
|
(2
|
)%
|
||||
Total Mutual Funds segment AUM
|
$
|
107,679
|
|
$
|
91,423
|
|
18
|
%
|
|
$
|
107,679
|
|
$
|
91,423
|
|
18
|
%
|
|
June 30,
2017 |
June 30, 2016
|
Change
|
|||||
Equity
|
$
|
58,047
|
|
$
|
46,808
|
|
24
|
%
|
Fixed Income
|
14,286
|
|
12,491
|
|
14
|
%
|
||
Multi-Strategy Investments [1]
|
18,923
|
|
15,642
|
|
21
|
%
|
||
Mutual Fund AUM
|
$
|
91,256
|
|
$
|
74,941
|
|
22
|
%
|
TALCOTT RESOLUTION
|
Operating Summary
|
||||||||||||||||
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
||||||||||||||
|
2017
|
2016
|
Change
|
2017
|
2016
|
Change
|
||||||||||
Earned premiums
|
$
|
35
|
|
$
|
28
|
|
25
|
%
|
$
|
70
|
|
$
|
56
|
|
25
|
%
|
Fee income and other
|
225
|
|
231
|
|
(3
|
%)
|
448
|
|
472
|
|
(5
|
%)
|
||||
Net investment income [1]
|
320
|
|
348
|
|
(8
|
%)
|
638
|
|
673
|
|
(5
|
%)
|
||||
Realized capital gains (losses):
|
|
|
|
|
|
|
|
|||||||||
Total other-than-temporary impairment (“OTTI”) losses
|
(9
|
)
|
(2
|
)
|
NM
|
|
(9
|
)
|
(9
|
)
|
—
|
%
|
||||
Other net realized capital gains (losses)
|
31
|
|
5
|
|
NM
|
|
(14
|
)
|
(100
|
)
|
86
|
%
|
||||
Net realized capital gains (losses) [1]
|
22
|
|
3
|
|
NM
|
|
(23
|
)
|
(109
|
)
|
79
|
%
|
||||
Total revenues
|
602
|
|
610
|
|
(1
|
%)
|
1,133
|
|
1,092
|
|
4
|
%
|
||||
Benefits, losses and loss adjustment expenses
|
348
|
|
346
|
|
1
|
%
|
680
|
|
700
|
|
(3
|
%)
|
||||
Amortization of DAC
|
24
|
|
24
|
|
—
|
%
|
43
|
|
54
|
|
(20
|
%)
|
||||
Insurance operating costs and other expenses
|
96
|
|
115
|
|
(17
|
%)
|
202
|
|
220
|
|
(8
|
%)
|
||||
Total benefits, losses and expenses
|
468
|
|
485
|
|
(4
|
%)
|
925
|
|
974
|
|
(5
|
%)
|
||||
Income before income taxes
|
134
|
|
125
|
|
7
|
%
|
208
|
|
118
|
|
76
|
%
|
||||
Income tax expense (benefit)
|
29
|
|
21
|
|
38
|
%
|
35
|
|
(3
|
)
|
NM
|
|
||||
Net income
|
$
|
105
|
|
$
|
104
|
|
1
|
%
|
$
|
173
|
|
$
|
121
|
|
43
|
%
|
Assets Under Management (end of period)
|
|
|
|
|
|
|
||||||||||
Variable annuity account value
|
$
|
40,668
|
|
$
|
41,738
|
|
(3
|
%)
|
|
|
|
|||||
Fixed market value adjusted and payout annuities
|
7,453
|
|
7,901
|
|
(6
|
%)
|
|
|
|
|||||||
Institutional annuity account value
|
13,635
|
|
15,279
|
|
(11
|
%)
|
|
|
|
|||||||
Other account value [2]
|
87,399
|
|
86,320
|
|
1
|
%
|
|
|
|
|||||||
Total account value
|
$
|
149,155
|
|
$
|
151,238
|
|
(1
|
%)
|
|
|
|
|||||
Variable Annuity Account Value
|
|
|
|
|
|
|
||||||||||
Account value, beginning of period
|
$
|
40,948
|
|
$
|
42,500
|
|
(4
|
%)
|
$
|
40,698
|
|
$
|
44,245
|
|
(8
|
%)
|
Net outflows
|
(1,373
|
)
|
(1,496
|
)
|
8
|
%
|
(2,893
|
)
|
(2,962
|
)
|
2
|
%
|
||||
Change in market value and other
|
1,093
|
|
734
|
|
49
|
%
|
2,863
|
|
455
|
|
NM
|
|
||||
Account value, end of period
|
$
|
40,668
|
|
$
|
41,738
|
|
(3
|
%)
|
$
|
40,668
|
|
$
|
41,738
|
|
(3
|
%)
|
[1]
|
For discussion of consolidated investment results, see MD&A - Investment Results, Net Investment Income (Loss) and Net Realized Capital Gains (Losses).
|
[2]
|
Other account value included
$31.2 billion
,
$14.9 billion
, and
$41.3 billion
as of
June 30, 2017
for the Retirement Plans, Individual Life and Private Placement Life Insurance businesses, respectively. Other account value included
$31.4 billion
,
$14.5 billion
, and
40.5 billion
at
June 30, 2016
for the Retirement Plans, Individual Life and Private Placement Life Insurance businesses, respectively. Account values associated with the Retirement Plans and Individual Life businesses no longer generate asset-based fee income due to the sales of these businesses through reinsurance transactions.
|
CORPORATE
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||
Operating Summary
|
2017
|
2016
|
Change
|
|
2017
|
2016
|
Change
|
||||||||||
Fee income [1]
|
$
|
1
|
|
$
|
1
|
|
—
|
%
|
|
$
|
2
|
|
$
|
2
|
|
—
|
%
|
Net investment income
|
5
|
|
6
|
|
(17
|
%)
|
|
9
|
|
17
|
|
(47
|
%)
|
||||
Net realized capital losses
|
(2
|
)
|
(1
|
)
|
(100
|
%)
|
|
(2
|
)
|
(5
|
)
|
60
|
%
|
||||
Total revenues
|
4
|
|
6
|
|
(33
|
%)
|
|
9
|
|
14
|
|
(36
|
%)
|
||||
Insurance operating costs and other expenses [1]
|
5
|
|
(1
|
)
|
NM
|
|
|
9
|
|
5
|
|
80
|
%
|
||||
Pension settlement
|
750
|
|
—
|
|
NM
|
|
|
750
|
|
—
|
|
NM
|
|
||||
Interest expense
|
81
|
|
85
|
|
(5
|
%)
|
|
164
|
|
171
|
|
(4
|
%)
|
||||
Total benefits, losses and expenses
|
836
|
|
84
|
|
NM
|
|
|
923
|
|
176
|
|
NM
|
|
||||
Loss before income taxes
|
(832
|
)
|
(78
|
)
|
NM
|
|
|
(914
|
)
|
(162
|
)
|
NM
|
|
||||
Income tax benefit
|
(292
|
)
|
(82
|
)
|
NM
|
|
|
(328
|
)
|
(137
|
)
|
(139
|
%)
|
||||
Net income (loss)
|
$
|
(540
|
)
|
$
|
4
|
|
NM
|
|
|
$
|
(586
|
)
|
$
|
(25
|
)
|
NM
|
|
[1]
|
Fee income includes the income associated with the sales of non-proprietary insurance products in the Company’s broker-dealer subsidiaries that has an offsetting commission expense included in insurance operating costs and other expenses.
|
|
•
|
risk identification and assessment;
|
•
|
the development of risk appetites, tolerances, and limits;
|
•
|
risk monitoring; and
|
•
|
internal and external risk reporting.
|
Coverage
|
Effective for the period
|
% of layer(s) reinsurance
|
Per occurrence limit
|
|
Retention
|
||||
Property losses arising from a single catastrophe event [1] [2]
|
1/1/2017 to 1/1/2018
|
88%
|
$
|
800
|
|
|
$
|
350
|
|
Property catastrophe losses from a Personal Lines Florida hurricane
|
6/1/2017 to 6/1/2018
|
90%
|
$
|
107
|
|
[3]
|
$
|
33
|
|
Workers compensation losses arising from a single catastrophe event [4]
|
1/1/2017 to 12/31/2017
|
80%
|
$
|
350
|
|
|
$
|
100
|
|
[1]
|
Certain aspects of our principal catastrophe treaty have terms that extend beyond the traditional one year term. While overall treaty is placed at 88%, each layer's placement varies slightly.
|
[2]
|
$50 of the property occurrence treaty can alternatively be used as part of the Property Aggregate treaty referenced below.
|
[3]
|
The per occurrence limit for Florida Hurricane Catastrophe Fund (FHCF), which is required coverage for homeowners business in Florida, is estimated to be $107 for the current treaty year, this is calculated on the best of available information from FHCF as of July 2017.
|
[4]
|
In addition to the limit shown, the workers compensation reinsurance includes a non-catastrophe, industrial accident layer, providing coverage for 80% of a$30 per event limit in excess of a $20 retention.
|
|
As of June 30, 2017
|
As of December 31, 2016
|
||||
Paid loss and loss adjustment expenses
|
$
|
94
|
|
$
|
89
|
|
Unpaid loss and loss adjustment expenses
|
2,422
|
|
2,449
|
|
||
Gross reinsurance recoverables [1]
|
$
|
2,516
|
|
$
|
2,538
|
|
Less: Allowance for uncollectible reinsurance
|
(166
|
)
|
(165
|
)
|
||
Net reinsurance recoverables
|
$
|
2,350
|
|
$
|
2,373
|
|
Reinsurance Recoverables
|
As of June 30, 2017
|
As of December 31, 2016
|
||||
Future policy benefits and unpaid loss and loss adjustment expenses and other policyholder funds and benefits payable
|
$
|
20,915
|
|
$
|
20,938
|
|
Gross reinsurance recoverables
|
$
|
20,915
|
|
$
|
20,938
|
|
Less: Allowance for uncollectible reinsurance [1]
|
—
|
|
—
|
|
||
Net reinsurance recoverables
|
$
|
20,915
|
|
$
|
20,938
|
|
•
|
Investing in a portfolio of high-quality and diverse securities;
|
•
|
Selling investments subject to credit risk;
|
•
|
Hedging through use of single name or basket credit default swaps;
|
•
|
Clearing transactions through central clearing houses that require daily variation margin;
|
•
|
Entering into contracts only with strong creditworthy institutions
|
•
|
Requiring collateral; and
|
•
|
Non-renewing policies/contracts or reinsurance treaties.
|
Total Variable Annuity Guarantees as of June 30, 2017
|
|||||||||||||
($ in billions)
|
Account
Value |
Gross Net Amount at Risk
|
Retained Net Amount at Risk
|
% of Contracts In the Money[2]
|
% In the Money [2] [3]
|
||||||||
U.S. Variable Annuity [1]
|
|
|
|
|
|
||||||||
GMDB [4]
|
$
|
40.7
|
|
$
|
3.1
|
|
$
|
0.6
|
|
17
|
%
|
22
|
%
|
GMWB
|
$
|
18.1
|
|
$
|
0.2
|
|
$
|
0.1
|
|
5
|
%
|
17
|
%
|
Total Variable Annuity Guarantees as of December 31, 2016
|
|||||||||||||
($ in billions)
|
Account
Value
|
Gross Net Amount at Risk
|
Retained Net Amount at Risk
|
% of Contracts In the Money [2]
|
% In the Money [2] [3]
|
||||||||
U.S. Variable Annuity [1]
|
|
|
|
|
|
||||||||
GMDB [4]
|
$
|
40.7
|
|
$
|
3.3
|
|
$
|
0.7
|
|
28
|
%
|
14
|
%
|
GMWB
|
$
|
18.3
|
|
$
|
0.2
|
|
$
|
0.1
|
|
7
|
%
|
13
|
%
|
[1]
|
Contracts with a guaranteed living benefit also have a guaranteed death benefit. The NAR for each benefit is shown; however these benefits are not additive. When a contract terminates due to death, any NAR related to GMWB is released. Similarly, when a contract goes into benefit status on a GMWB, the GMDB NAR is reduced to zero.
|
[2]
|
Excludes contracts that are fully reinsured.
|
[3]
|
For all contracts that are “in the money”, this represents the percentage by which the average contract was in the money.
|
[4]
|
Includes contracts that had a GMDB at issue but no longer have a GMDB due to certain elections made by policyholders or their beneficiaries. Such contracts had
$1.6 billion
of account value as June 30, 2017 and
$1.5 billion
as of December 31, 2016.
|
Variable Annuity Guarantees [1]
|
U.S. GAAP Treatment [1]
|
Primary Market Risk Exposures [1]
|
GMDB and life-contingent component of the GMWB
|
Accumulation of the portion of fees required to cover expected claims, less accumulation of actual claims paid
|
Equity Market Levels
|
GMWB (excluding life-contingent portions)
|
Fair Value
|
Equity Market Levels / Implied
Volatility / Interest Rates
|
[1]
|
Each of these guarantees and the related U.S. GAAP accounting volatility will also be influenced by actual and estimated policyholder behavior.
|
[1]
|
These sensitivities are based on the following key market levels as of June 30, 2017: 1) S&P of
2,423
; 2) 10yr US swap rate of
2.32%
; and 3) S&P 10yr volatility of
25.11%
.
|
•
|
The sensitivity analysis is only valid as of the measurement date and assumes instantaneous changes in the capital market factors and no ability to rebalance hedge positions prior to the market changes;
|
•
|
Changes to the underlying hedging program, policyholder behavior, and variation in underlying fund performance relative to the hedged index, which could materially impact the liability; and
|
•
|
The impact of elapsed time on liabilities or hedge assets, any non-parallel shifts in capital market factors, or correlated moves across the sensitivities.
|
Fixed Maturities by Credit Quality
|
||||||||||||||||
|
June 30, 2017
|
December 31, 2016
|
||||||||||||||
|
Amortized Cost
|
Fair Value
|
Percent of Total Fair Value
|
Amortized Cost
|
Fair Value
|
Percent of Total Fair Value
|
||||||||||
United States Government/Government agencies
|
$
|
7,242
|
|
$
|
7,510
|
|
13.0
|
%
|
$
|
7,474
|
|
$
|
7,626
|
|
13.6
|
%
|
AAA
|
6,929
|
|
7,231
|
|
12.5
|
%
|
6,733
|
|
6,969
|
|
12.5
|
%
|
||||
AA
|
9,554
|
|
10,020
|
|
17.3
|
%
|
8,764
|
|
9,182
|
|
16.4
|
%
|
||||
A
|
14,452
|
|
15,574
|
|
26.9
|
%
|
14,169
|
|
14,996
|
|
26.8
|
%
|
||||
BBB
|
13,446
|
|
14,204
|
|
24.5
|
%
|
13,399
|
|
13,901
|
|
24.8
|
%
|
||||
BB & below
|
3,177
|
|
3,295
|
|
5.8
|
%
|
3,266
|
|
3,329
|
|
5.9
|
%
|
||||
Total fixed maturities, AFS
|
$
|
54,800
|
|
$
|
57,834
|
|
100
|
%
|
$
|
53,805
|
|
$
|
56,003
|
|
100
|
%
|
Securities by Type
|
||||||||||||||||||||||||||||
|
June 30, 2017
|
December 31, 2016
|
||||||||||||||||||||||||||
|
Cost or Amortized Cost
|
Gross Unrealized Gains
|
Gross Unrealized Losses
|
Fair Value
|
Percent of Total Fair Value
|
Cost or Amortized Cost
|
Gross Unrealized Gains
|
Gross Unrealized Losses
|
Fair Value
|
Percent of Total Fair Value
|
||||||||||||||||||
Asset-backed securities ("ABS")
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Consumer loans
|
$
|
1,987
|
|
$
|
14
|
|
$
|
(16
|
)
|
$
|
1,985
|
|
3.4
|
%
|
$
|
2,057
|
|
$
|
10
|
|
$
|
(30
|
)
|
$
|
2,037
|
|
3.6
|
%
|
Small business
|
84
|
|
4
|
|
(1
|
)
|
87
|
|
0.2
|
%
|
86
|
|
3
|
|
(1
|
)
|
88
|
|
0.2
|
%
|
||||||||
Other
|
279
|
|
3
|
|
—
|
|
282
|
|
0.5
|
%
|
253
|
|
4
|
|
—
|
|
257
|
|
0.5
|
%
|
||||||||
Collateralized debt obligations ("CDOs")
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
CLOs
|
2,418
|
|
3
|
|
(3
|
)
|
2,418
|
|
4.2
|
%
|
1,597
|
|
7
|
|
(4
|
)
|
1,600
|
|
2.9
|
%
|
||||||||
Other
|
9
|
|
30
|
|
—
|
|
39
|
|
0.1
|
%
|
256
|
|
60
|
|
—
|
|
316
|
|
0.6
|
%
|
||||||||
CMBS
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Agency [1]
|
1,661
|
|
32
|
|
(14
|
)
|
1,679
|
|
2.9
|
%
|
1,439
|
|
24
|
|
(20
|
)
|
1,443
|
|
2.6
|
%
|
||||||||
Bonds
|
2,686
|
|
73
|
|
(19
|
)
|
2,740
|
|
4.7
|
%
|
2,681
|
|
62
|
|
(33
|
)
|
2,710
|
|
4.7
|
%
|
||||||||
Interest only (“IOs”)
|
738
|
|
22
|
|
(6
|
)
|
754
|
|
1.3
|
%
|
787
|
|
11
|
|
(15
|
)
|
783
|
|
1.4
|
%
|
||||||||
Corporate
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Basic industry
|
1,092
|
|
79
|
|
(1
|
)
|
1,170
|
|
2.0
|
%
|
1,071
|
|
61
|
|
(9
|
)
|
1,123
|
|
2.0
|
%
|
||||||||
Capital goods
|
1,693
|
|
115
|
|
(6
|
)
|
1,802
|
|
3.1
|
%
|
1,522
|
|
110
|
|
(15
|
)
|
1,617
|
|
2.9
|
%
|
||||||||
Consumer cyclical
|
1,419
|
|
89
|
|
(3
|
)
|
1,505
|
|
2.6
|
%
|
1,517
|
|
78
|
|
(10
|
)
|
1,585
|
|
2.8
|
%
|
||||||||
Consumer non-cyclical
|
3,380
|
|
243
|
|
(15
|
)
|
3,608
|
|
6.2
|
%
|
3,792
|
|
206
|
|
(45
|
)
|
3,953
|
|
7.1
|
%
|
||||||||
Energy
|
2,221
|
|
169
|
|
(15
|
)
|
2,375
|
|
4.1
|
%
|
2,098
|
|
142
|
|
(17
|
)
|
2,223
|
|
4.0
|
%
|
||||||||
Financial services
|
5,058
|
|
336
|
|
(12
|
)
|
5,382
|
|
9.3
|
%
|
4,806
|
|
262
|
|
(32
|
)
|
5,036
|
|
9.0
|
%
|
||||||||
Tech./comm.
|
3,379
|
|
356
|
|
(7
|
)
|
3,728
|
|
6.4
|
%
|
3,385
|
|
265
|
|
(20
|
)
|
3,630
|
|
6.5
|
%
|
||||||||
Transportation
|
914
|
|
56
|
|
(2
|
)
|
968
|
|
1.7
|
%
|
896
|
|
46
|
|
(7
|
)
|
935
|
|
1.7
|
%
|
||||||||
Utilities
|
4,803
|
|
384
|
|
(42
|
)
|
5,145
|
|
8.9
|
%
|
5,024
|
|
326
|
|
(65
|
)
|
5,285
|
|
9.3
|
%
|
||||||||
Other
|
348
|
|
15
|
|
(2
|
)
|
361
|
|
0.6
|
%
|
269
|
|
14
|
|
(4
|
)
|
279
|
|
0.5
|
%
|
||||||||
Foreign govt./govt. agencies
|
1,249
|
|
56
|
|
(8
|
)
|
1,297
|
|
2.2
|
%
|
1,164
|
|
33
|
|
(26
|
)
|
1,171
|
|
2.1
|
%
|
||||||||
Municipal bonds
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Taxable
|
1,538
|
|
137
|
|
(9
|
)
|
1,666
|
|
2.9
|
%
|
1,497
|
|
116
|
|
(20
|
)
|
1,593
|
|
2.8
|
%
|
||||||||
Tax-exempt
|
9,923
|
|
715
|
|
(20
|
)
|
10,618
|
|
18.4
|
%
|
9,328
|
|
616
|
|
(51
|
)
|
9,893
|
|
17.7
|
%
|
||||||||
RMBS
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Agency
|
1,791
|
|
39
|
|
(5
|
)
|
1,825
|
|
3.2
|
%
|
2,493
|
|
39
|
|
(28
|
)
|
2,504
|
|
4.5
|
%
|
||||||||
Non-agency
|
268
|
|
4
|
|
(1
|
)
|
271
|
|
0.5
|
%
|
178
|
|
3
|
|
(1
|
)
|
180
|
|
0.3
|
%
|
||||||||
Alt-A
|
117
|
|
4
|
|
—
|
|
121
|
|
0.2
|
%
|
117
|
|
2
|
|
—
|
|
119
|
|
0.2
|
%
|
||||||||
Sub-prime
|
1,955
|
|
48
|
|
(1
|
)
|
2,002
|
|
3.5
|
%
|
1,950
|
|
22
|
|
(8
|
)
|
1,964
|
|
3.5
|
%
|
||||||||
U.S. Treasuries
|
3,790
|
|
235
|
|
(19
|
)
|
4,006
|
|
6.9
|
%
|
3,542
|
|
182
|
|
(45
|
)
|
3,679
|
|
6.6
|
%
|
||||||||
Fixed maturities, AFS
|
54,800
|
|
3,261
|
|
(227
|
)
|
57,834
|
|
100
|
%
|
53,805
|
|
2,704
|
|
(506
|
)
|
56,003
|
|
100
|
%
|
||||||||
Equity securities
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Financial services
|
176
|
|
26
|
|
—
|
|
202
|
|
19.1
|
%
|
203
|
|
15
|
|
(1
|
)
|
217
|
|
19.8
|
%
|
||||||||
Other
|
788
|
|
85
|
|
(20
|
)
|
853
|
|
80.9
|
%
|
817
|
|
81
|
|
(18
|
)
|
880
|
|
80.2
|
%
|
||||||||
Equity securities, AFS
|
964
|
|
111
|
|
(20
|
)
|
1,055
|
|
100
|
%
|
1,020
|
|
96
|
|
(19
|
)
|
1,097
|
|
100
|
%
|
||||||||
Total AFS securities
|
$
|
55,764
|
|
$
|
3,372
|
|
$
|
(247
|
)
|
$
|
58,889
|
|
|
$
|
54,825
|
|
$
|
2,800
|
|
$
|
(525
|
)
|
$
|
57,100
|
|
|
||
Fixed maturities, FVO
|
|
|
|
$
|
146
|
|
|
|
|
|
$
|
293
|
|
|
[1]
|
Includes securities with pools of loans issued by the Small Business Administration which are backed by the full faith and credit of the U.S. government.
|
Financial Services by Credit Quality
|
|||||||||||||||||||
|
June 30, 2017
|
|
December 31, 2016
|
||||||||||||||||
|
Amortized Cost
|
Fair Value
|
Net Unrealized Gain/(Loss)
|
|
Amortized Cost
|
Fair Value
|
Net Unrealized Gain/(Loss)
|
||||||||||||
AAA
|
$
|
33
|
|
$
|
35
|
|
$
|
2
|
|
|
$
|
13
|
|
$
|
15
|
|
$
|
2
|
|
AA
|
492
|
|
513
|
|
21
|
|
|
583
|
|
602
|
|
19
|
|
||||||
A
|
2,372
|
|
2,548
|
|
176
|
|
|
2,219
|
|
2,354
|
|
135
|
|
||||||
BBB
|
2,082
|
|
2,203
|
|
121
|
|
|
1,856
|
|
1,934
|
|
78
|
|
||||||
BB & below
|
255
|
|
285
|
|
30
|
|
|
338
|
|
348
|
|
10
|
|
||||||
Total [1]
|
$
|
5,234
|
|
$
|
5,584
|
|
$
|
350
|
|
|
$
|
5,009
|
|
$
|
5,253
|
|
$
|
244
|
|
Exposure to CMBS Bonds as of June 30, 2017
|
||||||||||||||||||||||||||||||||||||
|
AAA
|
AA
|
A
|
BBB
|
BB and Below
|
Total
|
||||||||||||||||||||||||||||||
Vintage Year [1]
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
||||||||||||||||||||||||
2008 & Prior
|
$
|
135
|
|
$
|
145
|
|
$
|
49
|
|
$
|
54
|
|
$
|
4
|
|
$
|
4
|
|
$
|
9
|
|
$
|
9
|
|
$
|
22
|
|
$
|
22
|
|
$
|
219
|
|
$
|
234
|
|
2009
|
—
|
|
—
|
|
10
|
|
11
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
10
|
|
11
|
|
||||||||||||
2010
|
18
|
|
19
|
|
8
|
|
8
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
26
|
|
27
|
|
||||||||||||
2011
|
55
|
|
58
|
|
—
|
|
—
|
|
15
|
|
15
|
|
—
|
|
—
|
|
—
|
|
—
|
|
70
|
|
73
|
|
||||||||||||
2012
|
39
|
|
40
|
|
6
|
|
6
|
|
21
|
|
22
|
|
19
|
|
18
|
|
—
|
|
—
|
|
85
|
|
86
|
|
||||||||||||
2013
|
16
|
|
16
|
|
95
|
|
98
|
|
102
|
|
106
|
|
4
|
|
4
|
|
—
|
|
—
|
|
217
|
|
224
|
|
||||||||||||
2014
|
301
|
|
311
|
|
63
|
|
65
|
|
73
|
|
73
|
|
9
|
|
9
|
|
8
|
|
8
|
|
454
|
|
466
|
|
||||||||||||
2015
|
171
|
|
172
|
|
200
|
|
200
|
|
207
|
|
211
|
|
115
|
|
119
|
|
11
|
|
11
|
|
704
|
|
713
|
|
||||||||||||
2016
|
143
|
|
142
|
|
252
|
|
249
|
|
121
|
|
125
|
|
80
|
|
84
|
|
—
|
|
—
|
|
596
|
|
600
|
|
||||||||||||
2017
|
60
|
|
60
|
|
220
|
|
220
|
|
—
|
|
—
|
|
25
|
|
26
|
|
—
|
|
—
|
|
305
|
|
306
|
|
||||||||||||
Total
|
$
|
938
|
|
$
|
963
|
|
$
|
903
|
|
$
|
911
|
|
$
|
543
|
|
$
|
556
|
|
$
|
261
|
|
$
|
269
|
|
$
|
41
|
|
$
|
41
|
|
$
|
2,686
|
|
$
|
2,740
|
|
Credit protection
|
31.8%
|
21.5%
|
14.2%
|
12.9%
|
23.2%
|
22.8%
|
Exposure to CMBS Bonds as of December 31, 2016
|
||||||||||||||||||||||||||||||||||||
|
AAA
|
AA
|
A
|
BBB
|
BB and Below
|
Total
|
||||||||||||||||||||||||||||||
Vintage Year [1]
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
||||||||||||||||||||||||
2008 & Prior
|
$
|
278
|
|
$
|
294
|
|
$
|
137
|
|
$
|
143
|
|
$
|
102
|
|
$
|
102
|
|
$
|
14
|
|
$
|
14
|
|
$
|
22
|
|
$
|
22
|
|
$
|
553
|
|
$
|
575
|
|
2009
|
11
|
|
11
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
11
|
|
11
|
|
||||||||||||
2010
|
18
|
|
19
|
|
8
|
|
8
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
26
|
|
27
|
|
||||||||||||
2011
|
55
|
|
59
|
|
—
|
|
—
|
|
13
|
|
13
|
|
2
|
|
2
|
|
—
|
|
—
|
|
70
|
|
74
|
|
||||||||||||
2012
|
40
|
|
41
|
|
6
|
|
6
|
|
30
|
|
30
|
|
20
|
|
18
|
|
—
|
|
—
|
|
96
|
|
95
|
|
||||||||||||
2013
|
16
|
|
17
|
|
95
|
|
99
|
|
110
|
|
113
|
|
4
|
|
4
|
|
—
|
|
—
|
|
225
|
|
233
|
|
||||||||||||
2014
|
301
|
|
309
|
|
64
|
|
65
|
|
72
|
|
70
|
|
1
|
|
1
|
|
—
|
|
—
|
|
438
|
|
445
|
|
||||||||||||
2015
|
210
|
|
210
|
|
200
|
|
198
|
|
207
|
|
206
|
|
87
|
|
87
|
|
—
|
|
—
|
|
704
|
|
701
|
|
||||||||||||
2016
|
132
|
|
130
|
|
249
|
|
242
|
|
113
|
|
113
|
|
64
|
|
64
|
|
—
|
|
—
|
|
558
|
|
549
|
|
||||||||||||
Total
|
$
|
1,061
|
|
$
|
1,090
|
|
$
|
759
|
|
$
|
761
|
|
$
|
647
|
|
$
|
647
|
|
$
|
192
|
|
$
|
190
|
|
$
|
22
|
|
$
|
22
|
|
$
|
2,681
|
|
$
|
2,710
|
|
Credit
protection |
33.3%
|
22.4%
|
18.0%
|
16.2%
|
32.5%
|
25.3%
|
[1]
|
The vintage year represents the year the pool of loans was originated.
|
Commercial Mortgage Loans
|
|||||||||||||||||||||||
|
June 30, 2017
|
|
December 31, 2016
|
||||||||||||||||||||
|
Amortized Cost [1]
|
|
Valuation Allowance
|
|
Carrying Value
|
|
Amortized Cost [1]
|
|
Valuation Allowance
|
|
Carrying Value
|
||||||||||||
Whole loans
|
$
|
5,687
|
|
|
$
|
(1
|
)
|
|
$
|
5,686
|
|
|
$
|
5,580
|
|
|
$
|
(19
|
)
|
|
$
|
5,561
|
|
A-Note participations
|
110
|
|
|
—
|
|
|
110
|
|
|
136
|
|
|
—
|
|
|
136
|
|
||||||
Total
|
$
|
5,797
|
|
|
$
|
(1
|
)
|
|
$
|
5,796
|
|
|
$
|
5,716
|
|
|
$
|
(19
|
)
|
|
$
|
5,697
|
|
Available For Sale Investments in Municipal Bonds
|
|||||||||||||||||||
|
June 30, 2017
|
|
December 31, 2016
|
||||||||||||||||
|
Amortized Cost
|
|
Fair Value
|
|
Weighted Average Credit Quality
|
|
Amortized Cost
|
|
Fair Value
|
|
Weighted Average Credit Quality
|
||||||||
General Obligation
|
$
|
1,804
|
|
|
$
|
1,928
|
|
|
AA
|
|
$
|
1,809
|
|
|
$
|
1,907
|
|
|
AA
|
Pre-Refunded [1]
|
1,673
|
|
|
1,782
|
|
|
AAA
|
|
1,590
|
|
|
1,693
|
|
|
AAA
|
||||
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Transportation
|
1,600
|
|
|
1,757
|
|
|
A+
|
|
1,591
|
|
|
1,724
|
|
|
A+
|
||||
Health Care
|
1,309
|
|
|
1,395
|
|
|
AA-
|
|
1,216
|
|
|
1,285
|
|
|
AA-
|
||||
Water & Sewer
|
1,092
|
|
|
1,158
|
|
|
AA
|
|
1,019
|
|
|
1,066
|
|
|
AA
|
||||
Education
|
1,019
|
|
|
1,071
|
|
|
AA
|
|
988
|
|
|
1,023
|
|
|
AA
|
||||
Leasing [2]
|
840
|
|
|
909
|
|
|
AA-
|
|
681
|
|
|
734
|
|
|
AA-
|
||||
Sales Tax
|
572
|
|
|
632
|
|
|
AA
|
|
574
|
|
|
627
|
|
|
AA
|
||||
Power
|
571
|
|
|
611
|
|
|
A+
|
|
571
|
|
|
605
|
|
|
A+
|
||||
Housing
|
83
|
|
|
89
|
|
|
A
|
|
136
|
|
|
140
|
|
|
A
|
||||
Other
|
898
|
|
|
952
|
|
|
AA-
|
|
650
|
|
|
682
|
|
|
AA-
|
||||
Total Revenue
|
7,984
|
|
|
8,574
|
|
|
AA-
|
|
7,426
|
|
|
7,886
|
|
|
AA-
|
||||
Total Municipal
|
$
|
11,461
|
|
|
$
|
12,284
|
|
|
AA
|
|
$
|
10,825
|
|
|
$
|
11,486
|
|
|
AA
|
[1]
|
Pre-Refunded bonds are bonds for which an irrevocable trust containing sufficient U.S. treasury, agency, or other securities has been established to fund the remaining payments of principal and interest.
|
[2]
|
Leasing revenue bonds are generally the obligations of a financing authority established by the municipality that leases facilities back to a municipality. The notes are typically secured by lease payments made by the municipality that is leasing the facilities financed by the issue. Lease payments may be subject to annual appropriation by the municipality or the municipality may be obligated to appropriate general tax revenues to make lease payments.
|
Investments in Limited Partnerships and Other Alternative Investments
|
|||||||||||
|
June 30, 2017
|
|
December 31, 2016
|
||||||||
|
Amount
|
Percent
|
|
Amount
|
Percent
|
||||||
Hedge funds
|
$
|
149
|
|
6.1
|
%
|
|
$
|
155
|
|
6.3
|
%
|
Real estate funds
|
644
|
|
26.3
|
%
|
|
629
|
|
25.6
|
%
|
||
Private equity and other funds
|
1,263
|
|
51.7
|
%
|
|
1,291
|
|
52.6
|
%
|
||
Other alternative investments [1]
|
389
|
|
15.9
|
%
|
|
381
|
|
15.5
|
%
|
||
Total
|
$
|
2,445
|
|
100
|
%
|
|
$
|
2,456
|
|
100
|
%
|
Unrealized Loss Aging for AFS Securities
|
|||||||||||||||||||||||||||||
|
June 30, 2017
|
|
December 31, 2016
|
||||||||||||||||||||||||||
Consecutive Months
|
Items
|
|
Cost or Amortized Cost
|
|
Fair Value
|
|
Unrealized Loss
|
|
Items
|
|
Cost or Amortized Cost
|
|
Fair Value
|
|
Unrealized Loss
|
||||||||||||||
Three months or less
|
944
|
|
|
$
|
4,953
|
|
|
$
|
4,923
|
|
|
$
|
(30
|
)
|
|
2,119
|
|
|
$
|
11,299
|
|
|
$
|
11,037
|
|
|
$
|
(262
|
)
|
Greater than three to six months
|
339
|
|
|
1,200
|
|
|
1,185
|
|
|
(15
|
)
|
|
1,109
|
|
|
2,039
|
|
|
1,934
|
|
|
(105
|
)
|
||||||
Greater than six to nine months
|
617
|
|
|
3,318
|
|
|
3,249
|
|
|
(69
|
)
|
|
151
|
|
|
484
|
|
|
456
|
|
|
(28
|
)
|
||||||
Greater than nine to eleven months
|
386
|
|
|
1,277
|
|
|
1,228
|
|
|
(49
|
)
|
|
151
|
|
|
452
|
|
|
441
|
|
|
(11
|
)
|
||||||
Twelve months or more
|
502
|
|
|
1,897
|
|
|
1,813
|
|
|
(84
|
)
|
|
657
|
|
|
2,565
|
|
|
2,446
|
|
|
(119
|
)
|
||||||
Total
|
2,788
|
|
|
$
|
12,645
|
|
|
$
|
12,398
|
|
|
$
|
(247
|
)
|
|
4,187
|
|
|
$
|
16,839
|
|
|
$
|
16,314
|
|
|
$
|
(525
|
)
|
Unrealized Loss Aging for AFS Securities Continuously Depressed Over 20%
|
|||||||||||||||||||||||||||||
|
June 30, 2017
|
|
December 31, 2016
|
||||||||||||||||||||||||||
Consecutive Months
|
Items
|
|
Cost or Amortized Cost
|
|
Fair Value
|
|
Unrealized Loss
|
|
Items
|
|
Cost or Amortized Cost
|
|
Fair Value
|
|
Unrealized Loss
|
||||||||||||||
Three months or less
|
59
|
|
|
$
|
31
|
|
|
$
|
23
|
|
|
$
|
(8
|
)
|
|
83
|
|
|
$
|
24
|
|
|
$
|
18
|
|
|
$
|
(6
|
)
|
Greater than three to six months
|
30
|
|
|
5
|
|
|
4
|
|
|
(1
|
)
|
|
38
|
|
|
13
|
|
|
9
|
|
|
(4
|
)
|
||||||
Greater than six to nine months
|
15
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21
|
|
|
14
|
|
|
10
|
|
|
(4
|
)
|
||||||
Greater than nine to eleven months
|
16
|
|
|
8
|
|
|
6
|
|
|
(2
|
)
|
|
11
|
|
|
1
|
|
|
—
|
|
|
(1
|
)
|
||||||
Twelve months or more
|
52
|
|
|
12
|
|
|
6
|
|
|
(6
|
)
|
|
56
|
|
|
19
|
|
|
11
|
|
|
(8
|
)
|
||||||
Total
|
172
|
|
|
$
|
56
|
|
|
$
|
39
|
|
|
$
|
(17
|
)
|
|
209
|
|
|
$
|
71
|
|
|
$
|
48
|
|
|
$
|
(23
|
)
|
Other-than-temporary Impairments Recognized in Earnings by Security Type
|
||||||||||||
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
||||||||||
|
2017
|
2016
|
2017
|
2016
|
||||||||
CMBS
|
$
|
1
|
|
$
|
—
|
|
$
|
2
|
|
$
|
1
|
|
Corporate
|
12
|
|
6
|
|
12
|
|
25
|
|
||||
Equity
|
1
|
|
1
|
|
1
|
|
4
|
|
||||
Total
|
$
|
14
|
|
$
|
7
|
|
$
|
15
|
|
$
|
30
|
|
|
|
•
|
$1.2 billion
in fixed maturities, short-term investments and cash at HFSG Holding Company
|
•
|
Borrowings available under a commercial paper program to a maximum of
$1 billion
. As of
June 30, 2017
there was
no
commercial paper outstanding
|
•
|
A senior unsecured five-year revolving credit facility that provides for borrowing capacity up to
$1 billion
of unsecured credit through October 31, 2019.
No
borrowings were outstanding as of
June 30, 2017
|
|
•
|
$320
maturing debt payment due in March of 2018
|
•
|
$500 junior subordinated debt expected to be called in June of 2018
|
•
|
$315
of interest on debt
|
•
|
$330
of common stockholders dividends, subject to the discretion of the Board of Directors
|
•
|
Approximately
$300
of expected pension plan contribution
|
|
•
|
Authorization for equity repurchases of up to
$1.3 billion
for the period October 31, 2016 through December 31, 2017
|
•
|
$650
remaining as of
June 30, 2017
|
•
|
During the
six months ended
June 30, 2017
, the Company repurchased
13.3 million
common shares for
$650 million
. During the period
July 1, 2017 through July 25, 2017
the Company repurchased approximately
1.6 million
common shares for
$85
under this authorization.
|
|
•
|
Dividend capacity of
$1.5 billion
for property and casualty subsidiaries with $850 of net dividends
|
•
|
Dividend capacity of
$207
for Hartford Life and Accident Insurance Company ("HLA") with $250 of dividends expected in 2017, subject to regulatory approval. During the first six months of 2017, HLA paid
$125
in dividends to the holding company.
|
•
|
Dividend capacity of
$1 billion
for Hartford Life Insurance Company. On January 30, 2017, Hartford Life Insurance Company ("HLIC") paid a dividend of
$300
.
|
•
|
During the first six months of 2017, Mutual Funds paid
$34
in dividends to HFSG Holding Company.
|
•
|
Over the remainder of 2017, HSFG Holding Company anticipates receiving additional net dividends of approximately
$425
from its property-casualty insurance subsidiaries,
$300
from HLIC, and
$125
from HLA, subject to regulatory approval and approximately $40 from Mutual Funds.
|
|
Contractholder Obligations
|
|||
|
As of June 30, 2017
|
||
Total Life contractholder obligations
|
$
|
167,087
|
|
Less: Separate account assets [1]
|
116,746
|
|
|
General account contractholder obligations
|
$
|
50,341
|
|
Composition of General Account Contractholder Obligations
|
|
||
Contracts without a surrender provision and/or fixed payout dates [2]
|
$
|
24,661
|
|
U.S. Fixed MVA annuities [3]
|
4,912
|
|
|
Other [4]
|
20,768
|
|
|
General account contractholder obligations
|
$
|
50,341
|
|
[1]
|
In the event customers elect to surrender separate account assets, Life Operations will use the proceeds from the sale of the assets to fund the surrender, and Life Operations’ liquidity position will not be impacted. In some instances Life Operations will receive a percentage of the surrender amount as compensation for early surrender (surrender charge), increasing Life Operations’ liquidity position. In addition, a surrender of variable annuity separate account or general account assets (see the following) will decrease Life Operations’ obligation for payments on guaranteed living and death benefits.
|
[2]
|
Relates to contracts such as payout annuities, institutional notes, term life, group benefit contracts, or death and living benefit reserves, which cannot be surrendered for cash.
|
[3]
|
Relates to annuities that are recorded in the general account under U.S. GAAP as the contractholders are subject to the Company's credit risk, although these annuities are held in a statutory separate account. In the statutory separate account, Life Operations is required to maintain invested assets with a fair value greater than or equal to the MVA surrender value of the Fixed MVA contract. In the event assets decline in value at a greater rate than the MVA surrender value of the Fixed MVA contract, Life Operations is required to contribute additional capital to the statutory separate account. Life Operations will fund these required contributions with operating cash flows or short-term investments. In the event that operating cash flows or short-term investments are not sufficient to fund required contributions, the Company may have to sell other invested assets at a loss, potentially resulting in a decrease in statutory surplus. As the fair value of invested assets in the statutory separate account are at least equal to the MVA surrender value of the Fixed MVA contract, surrender of Fixed MVA annuities will have an insignificant impact on the liquidity requirements of Life Operations.
|
[4]
|
Surrenders of, or policy loans taken from, as applicable, these general account liabilities, which include the general account option for Life Operations' individual variable annuities and the variable life contracts of the former Individual Life business, the general account option for annuities of the former Retirement Plans business and universal life contracts sold by the former Individual Life business, may be funded through operating cash flows of Life Operations, available short-term investments, or Life Operations may be required to sell fixed maturity investments to fund the surrender payment. Sales of fixed maturity investments could result in the recognition of realized losses and insufficient proceeds to fully fund the surrender amount. In this circumstance, Life Operations may need to take other actions, including enforcing certain contract provisions which could restrict surrenders and/or slow or defer payouts. The Company has ceded reinsurance in connection with the sales of its Retirement Plans and Individual Life businesses to MassMutual and Prudential, respectively. These reinsurance transactions do not extinguish the Company's primary liability on the insurance policies issued under these businesses.
|
Capital Structure
|
||||||||
|
June 30, 2017
|
December 31, 2016
|
Change
|
|||||
Short-term debt (includes current maturities of long-term debt)
|
$
|
320
|
|
$
|
416
|
|
(23
|
)%
|
Long-term debt
|
4,817
|
|
4,636
|
|
4
|
%
|
||
Total debt [1]
|
5,137
|
|
5,052
|
|
2
|
%
|
||
Stockholders’ equity excluding accumulated other comprehensive income (loss), net of tax (“AOCI”)
|
16,794
|
|
17,240
|
|
(3
|
)%
|
||
AOCI, net of tax
|
494
|
|
(337
|
)
|
NM
|
|
||
Total stockholders’ equity
|
$
|
17,288
|
|
$
|
16,903
|
|
2
|
%
|
Total capitalization including AOCI
|
$
|
22,425
|
|
$
|
21,955
|
|
2
|
%
|
Debt to stockholders’ equity
|
30
|
%
|
30
|
%
|
|
|||
Debt to capitalization
|
23
|
%
|
23
|
%
|
|
[1]
|
Total debt of the Company excludes
$10
and
$20
of consumer notes as of
June 30, 2017
and
December 31, 2016
, respectively.
|
|
Six Months Ended June 30,
|
|||||
|
2017
|
2016
|
||||
Net cash provided by operating activities
|
$
|
894
|
|
$
|
816
|
|
Net cash provided (used) by investing activities
|
$
|
(1,476
|
)
|
$
|
341
|
|
Net cash used for financing activities
|
$
|
—
|
|
$
|
(1,132
|
)
|
Cash – end of period
|
$
|
362
|
|
$
|
461
|
|
Statutory Capital Roll Forward for the Company's Insurance Subsidiaries
|
|||||||||
|
Property and Casualty Insurance Subsidiaries
|
Life Insurance Subsidiaries
|
Total
|
||||||
U.S. statutory capital at January 1, 2017
|
$
|
8,261
|
|
$
|
6,022
|
|
$
|
14,283
|
|
Variable annuity surplus impacts
|
—
|
|
17
|
|
17
|
|
|||
Statutory earnings (excluding VA for Life)
|
739
|
|
226
|
|
965
|
|
|||
Dividends to parent
|
(425
|
)
|
(425
|
)
|
(850
|
)
|
|||
Other items
|
(199
|
)
|
64
|
|
(135
|
)
|
|||
Net change to U.S. statutory capital
|
115
|
|
(118
|
)
|
(3
|
)
|
|||
U.S. statutory capital at June 30, 2017
|
$
|
8,376
|
|
$
|
5,904
|
|
$
|
14,280
|
|
See Exhibits Index on page
|
134
.
|
|
|
The Hartford Financial Services Group, Inc.
|
||
|
|
(Registrant)
|
||
|
|
|||
Date:
|
July 27, 2017
|
/s/ Scott R. Lewis
|
||
|
|
Scott R. Lewis
|
||
|
|
Senior Vice President and Controller
|
||
|
|
(Chief accounting officer and duly
authorized signatory)
|
Exhibit No.
|
Description
|
Form
|
File No.
|
Exhibit No
|
Filing Date
|
2.01
|
|
|
|
|
|
3.01
|
8-K
|
001-13958
|
3.01
|
10/20/2014
|
|
3.02
|
8-K
|
001-13958
|
3.01
|
7/21/2016
|
|
15.01
|
|
|
|
|
|
31.01
|
|
|
|
|
|
31.02
|
|
|
|
|
|
32.01
|
|
|
|
|
|
32.02
|
|
|
|
|
|
101.INS
|
XBRL Instance Document.**
|
|
|
|
|
101.SCH
|
XBRL Taxonomy Extension Schema.**
|
|
|
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase.**
|
|
|
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase.**
|
|
|
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase.**
|
|
|
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase.**
|
|
|
|
|
*
|
Management contract, compensatory plan or arrangement.
|
|
|
|
|
**
|
Filed with the Securities and Exchange Commission as an exhibit to this report.
|
|
|
|
|
^
|
Confidential treatment has been requested for certain portions of this agreement. Schedules and exhibits to this agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished supplementally to the Securities and Exchange Commission on request.
|
|
|
|
|
1.
|
Closing
.
On the terms and subject to the conditions set forth in paragraph 5, the consummation of the Closing Date Transfers and the Contract Issuance (collectively, the “
Closing
”) will take place on June 30, 2017 if on such date all of the conditions set forth in paragraph 5 have been satisfied or waived, or if the Closing has not occurred on June 30, 2017, then such later date that is one business day after the conditions set forth in paragraph 5 have been satisfied or waived (the “
Closing Date
”). In addition to the actions specifically provided for elsewhere in this Commitment Agreement, each of the parties will cooperate with each other and use commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or to cause to be done, all things reasonably necessary on its part to consummate the Closing.
|
2.
|
Contract Issuance
.
Contemporaneously with Insurer’s receipt of the Closing Date Transfers (as defined below) and subject to the conditions set forth in paragraph 5, Company and Insurer will each duly execute the Contract and Insurer will issue and deliver to Company the Contract (the “
Contract Issuance
”).
|
a.
|
Group Annuity Contract
. An executable copy of the Contract, including its annuity exhibit, is attached hereto as Schedule 1.
|
b.
|
Necessary Data
. In order for Insurer to issue the Contract and prepare the annuity exhibit:
|
i.
|
Company has delivered the Base File (the “
Annuity Exhibit File
”).
|
ii.
|
Company will provide to Insurer on or before [ * * * ] access to a [ * * * ] portal containing a key that will provide [ * * * ] and the information necessary for Insurer to draft provisions of the Contract, and administer the payments thereunder [ * * * ]. The key provided to Insurer through the [ * * * ] portal will enable Insurer to decode the Base File such that Insurer will have the [ * * * ] (the “
Required Data
”), [ * * * ].
|
iii.
|
Company will deliver or cause to be delivered to Insurer on or before [ * * * ], the Final Production Data File described in Schedule 8.
|
c.
|
Allocation of Closing Premium Amount
. Upon the Contract Issuance, Insurer will allocate the Closing Premium Amount into the insulated separate account dedicated to the Contract.
|
d.
|
Tax Reporting
. Upon issuance of the Contract, Insurer will be responsible for all federal and applicable state and local tax reporting required with respect to the Annuity Payments.
|
3.
|
Closing Premium
.
|
a.
|
Closing Premium Amount
. Independent Fiduciary will irrevocably direct the Plan Custodian to (i) pay Insurer [ * * * ] (as may be adjusted pursuant to paragraph 11.a.i., the “
Closing Premium Amount
”), which amount will be satisfied by (1) assigning, transferring and delivering to Insurer all rights, title and interests in and to each Eligible Asset set forth on the Transferred Asset Schedule, attached hereto as Schedule 2, as updated in accordance with paragraph 3.b, and (2) paying to Insurer cash equal to [ * * * ], if any, of (I) the [ * * * ] over (II) the [ * * * ] of the [ * * * ] of [ * * * ] as of the close of business on the [ * * * ] for each [ * * * ] and (ii) [ * * * ] ((i) and (ii), collectively, the “
Closing Date Transfers
”). If on or following the [ * * * ] the [ * * * ] receives any [ * * * ] with respect to [ * * * ], the [ * * * ] will be retained by the [ * * * ] unless such [ * * * ] were due to the [ * * * ] on or after the [ * * * ]. In addition, other [ * * * ] relevant to [ * * * ] will be retained by the [ * * * ]. In all cases, Company and Independent Fiduciary will work with Insurer in good faith to cause any [ * * * ] to be made to the correct party. In addition, for any [ * * * ] in respect of [ * * * ] due to the [ * * * ] that occur [ * * * ] following the [ * * * ] will work together in good faith to [ * * * ] as needed to reflect [ * * * ]. [ * * * ] acknowledges and agrees that, if the [ * * * ].
|
b.
|
Schedule 2 Updates
. On the [ * * * ] business day after the Commitment Agreement Date, Insurer will deliver to Independent Fiduciary and Company an updated Schedule 2 that reflects the Fair Market Value of each Schedule 2 Asset [ * * * ]. If any dispute with respect to any such information cannot be resolved on or prior to the Closing Date, Insurer’s determination will control for purposes of the Closing Date Transfers but Independent Fiduciary may direct the Plan Custodian to immediately commence an arbitration dispute with respect to any such information. On the Closing Date, Insurer will, if needed, update Schedule 2 to reflect the removal of [ * * * ]. Insurer will, if needed, further update Schedule 2 to reflect the removal of [ * * * ] and is returned to the Plan Custodian in accordance therewith.
|
c.
|
[ * * * ]. On and as of the business day prior to the Closing Date, Insurer will provide to Independent Fiduciary and Company [ * * * ]. Prior to the Closing Date, Company will confirm to Insurer in writing that such information is accurate and complete or will provide any additions, deletions or corrections to such information. If any dispute with respect to any such information cannot be resolved on or prior
|
d.
|
[ * * * ]. By written notice to the other party on or before the fifth business day following the Closing Date, Company or Insurer may identify [ * * * ] and the parties will work in good faith for seven business days following the receipt of such notice to agree on which, if any, [ * * * ]. If the parties agree that [ * * * ] within such seven business days following the receipt of such notice, then, on or before the date that is three business days following such agreement, Independent Fiduciary will promptly cause the Plan Custodian to pay to Insurer an amount, in cash, equal to [ * * * ], and, simultaneously with receipt of such payment from the Plan Custodian, Insurer will return [ * * * ] to the Plan Custodian together with [ * * * ].
|
e.
|
Interim Post-Closing [ * * * ]
. Schedule 3 provides a description of the methodologies and procedures by which Insurer will calculate the Interim Post-Closing [ * * * ]. Insurer, Company and Independent Fiduciary will cooperate in good faith in calculating the Interim Post-Closing [ * * * ] subject to the following acknowledgements, limitations and conditions:
|
i.
|
Interim True-Up File
. Twenty business days before the Interim True-Up Date, Insurer will send to Company, in the form of a changes only file that incorporates any updates to [ * * * ] included in the Base File, as supplemented by the data provided pursuant to paragraph 2.b, reflecting any [ * * * ] known to Insurer as of the Interim Data Finalization Date (the “
Interim True-Up File
”).
|
ii.
|
[ * * * ] and Annuity Exhibit
.
|
1.
|
To the extent that Company discovers or has any [ * * * ] after [ * * * ] and before the Interim Data Finalization Date, Company will provide written notice of such [ * * * ] as promptly as reasonably practicable to Insurer. Insurer will only be responsible for incorporating into the calculation of the Interim Post-Closing [ * * * ]. Such incorporation is subject to Insurer’s agreement with such [ * * * ] and any limitations on incorporating such [ * * * ] into the Interim Post-Closing [ * * * ] set forth in Schedule 3.
|
2.
|
Ten business days before the Interim True-Up Date, Insurer will deliver to Company the revised annuity exhibit utilizing and consistent with the Interim True-Up File and reflecting any [ * * * ] in accordance with paragraph 3.e.i and Schedule 3. Six business days before the Interim True-Up Date, Company will respond to Insurer with any questions on the revised annuity exhibit. Insurer and Company will cooperate in good faith to resolve any discrepancies on or before the fourth business day before the Interim True-Up Date and Insurer will reflect in the revised annuity exhibit any changes that have been agreed to on or before such fourth business day.
|
iii.
|
Interim Post-Closing [ * * * ] Calculation
. Three business days before the Interim True-Up Date, Insurer will send the calculation of the Interim Post-Closing [ * * * ] to Company.
|
iv.
|
Interim [ * * * ] Payment
. The Interim Post-Closing [ * * * ] will be paid on the Interim True-Up Date as follows: (1) if the Interim Post-Closing [ * * * ] is a positive number, then Independent
|
f.
|
Final [ * * * ]
. Schedule 3 provides a description of the methodologies and procedures by which Insurer will calculate the Final [ * * * ]. Insurer, Company and Independent Fiduciary will cooperate in good faith in calculating the Final [ * * * ] subject to the following acknowledgements, limitations and conditions:
|
i.
|
Final True-Up File
. Twenty business days before the Final True-Up Date, Insurer will send to Company, in the form of a changes only file that incorporates any updates to [ * * * ] included in the Base File, as supplemented by the data provided pursuant to paragraph 2.b, reflecting any [ * * * ] known to Insurer as of the Data Finalization Date that were not included in the Interim True-Up File (the “
Final True-Up File
”).
|
ii.
|
[ * * * ] and Annuity Exhibit
.
|
1.
|
To the extent that Company discovers or has any [ * * * ] after the Interim Data Finalization Date and before the Data Finalization Date, Company will provide written notice of such [ * * * ] as promptly as reasonably practicable to Insurer. Insurer will only be responsible for incorporating into the calculation of the Final [ * * * ]. Such incorporation is subject to Insurer’s agreement with such [ * * * ] and any limitations on incorporating such [ * * * ] into the Final [ * * * ] set forth in Schedule 3.
|
2.
|
Ten business days before the Final True-Up Date, Insurer will deliver to Company the revised annuity exhibit utilizing and consistent with the Final True-Up File and reflecting any [ * * * ] in accordance with paragraph 3.f.i and Schedule 3. Six business days before the Final True-Up Date, Company will respond to Insurer with any questions on the revised annuity exhibit. Insurer and Company will cooperate in good faith to resolve any discrepancies on or before the fourth business day before the Final True-Up Date and Insurer will reflect in the revised annuity exhibit any changes that have been agreed to on or before such fourth business day. Company acknowledges and agrees that the revised annuity exhibit will not include [ * * * ]. [ * * * ] will cooperate and use their respective reasonable best efforts, including [ * * * ] in a form acceptable to [ * * * ] for [ * * * ] to deliver the [ * * * ].
|
iii.
|
Final [ * * * ] Calculation
. Three business days before the Final True-Up Date, Insurer will send the calculation of the Final [ * * * ] to Company.
|
iv.
|
Final [ * * * ] Payment
. The Final [ * * * ] will be paid on the Final True-Up Date as follows: (1) if the Final [ * * * ] is a positive number, then Independent Fiduciary will irrevocably direct the Plan Custodian to pay to Insurer an amount, in cash, equal to [ * * * ] or (2) if the Final [ * * * ] is a negative number, then Insurer will pay to the Plan Custodian an amount, in cash, equal to [ * * * ]. Upon payment of the Final [ * * * ], Company and Insurer will amend the Contract on the Final True-Up Date to reflect such Final [ * * * ] and payment thereof and the revised annuity exhibit.
|
g.
|
Available Assets
. The Plan’s assets currently held by the Plan Custodian are sufficient to enable the Plan Custodian to pay all amounts that it is directed to pay to Insurer by Independent Fiduciary pursuant to this Commitment Agreement.
|
4.
|
Representations and Warranties
.
|
a.
|
Company Representations and Warranties
. Company hereby represents and warrants to Insurer and Independent Fiduciary as of the Commitment Agreement Date and as of the Closing Date that:
|
i.
|
Due Organization, Good Standing and Corporate Power
. Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Company is duly qualified or licensed to do business and is in good standing in each jurisdiction in which its performance of its obligations in the Commitment Agreement and the transactions contemplated hereunder makes such qualification or licensing necessary, except in such jurisdictions where the failure to be in good standing or so qualified or licensed would not be material. Company has all requisite power and authority to enter into and carry out its obligations under this Commitment Agreement and to consummate the transactions contemplated to be undertaken by Company in this Commitment Agreement.
|
ii.
|
Accuracy of Information
. To Company’s knowledge, (1) the mortality experience data file provided by or on behalf of Company to Insurer identified on Schedule 4 did not contain any misstatements or omissions that were, in the aggregate, material, and (2) the data in respect of benefit amounts before and after any social security offset, dependent spouse death pension annuity amounts, any future benefit change dates, forms of annuities and the census data for name, date of birth, date of death, state of residence, social security or federal taxpayer identification number, lump-sum indicator, status (beneficiary in pay or participant), years of service or pre-commencement death benefit factor, in each case, with respect to the potential Annuitized Lives that was furnished by or on behalf of Company to Insurer, was not generated using any materially incorrect systematic assumptions or material omissions.
|
iii.
|
Plan Investments
. There are no commingled investment vehicles that hold Plan Assets, the units of which are or will be Plan Assets involved in the transactions contemplated by this Commitment Agreement. No Plan Assets that are or will be involved in the transactions contemplated by this Commitment Agreement are or will be managed by any investment manager listed on Schedule 5, and no investment advisor listed on Schedule 5 renders or will render investment advice (within the meaning of ERISA § 3(21)(A)(ii)) with respect to those assets. The Plan Assets that are or will be involved in the transactions contemplated by this Commitment Agreement will, immediately prior to the Closing, be exclusively managed by [ * * * ]. [ * * * ] has not engaged any sub-managers or advisors with respect to its management of the Plan Assets that are or will be involved in the transactions contemplated by this Commitment Agreement.
|
iv.
|
Compliance with ERISA
. The Plan is maintained under and is subject to ERISA and, to Company’s knowledge, is in compliance with ERISA in all material respects. To Company’s knowledge, no event has occurred that is reasonably likely to result in the Plan losing its status as qualified by the Code for preferential tax treatment under Code §§ 401(a) and 501(a). All Plan amendments necessary to effect the transactions contemplated by this Commitment Agreement and all other
|
v.
|
Independent Fiduciary
. Independent Fiduciary has been duly appointed as independent fiduciary of the Plan with respect to the purchase of one or more group annuity contracts to (1) be the designated fiduciary responsible for selecting one or more insurers to provide annuities in accordance and compliance with the ERISA Requirements, (2) determine whether the transactions contemplated by this Commitment Agreement and in the Contract satisfy ERISA, (3) represent the interests of the Plan and its participants and beneficiaries in connection with the transaction and the negotiation of the Commitment Agreement and, to the extent set forth in the engagement letter between The Hartford Pension Fund Trust and Investment Committee and Independent Fiduciary dated March 20, 2017 (the “
IF Engagement Letter
”), the terms of any agreements with Insurer, including the Contract and the annuity certificates, (4) direct the Plan Custodian on behalf of the Plan to transfer the Closing Date Transfers in connection with the consummation of the transactions contemplated by this Commitment Agreement and any amounts required pursuant to paragraphs 3.d, 3.e.iv and 3.f.iv and (5) take all other actions on behalf of the Plan necessary to effectuate the foregoing to the extent set forth in the IF Engagement Letter.
|
vi.
|
Plan Custodian Is Directed Custodian
. The Plan Custodian has been duly appointed as the directed custodian of the Plan and will be directed by Independent Fiduciary and is obligated to follow Independent Fiduciary’s directions to effectuate and consummate the transactions contemplated by this Commitment Agreement and the IF Engagement Letter.
|
vii.
|
No Commissions
. No fees, commissions or payments are or will be owed by Company to any individual or entity in connection with the transactions contemplated by this Commitment Agreement and all other agreements it contemplates for which any other party, or its respective affiliates or representatives, could be liable.
|
viii.
|
Enforceability
. This Commitment Agreement is duly executed and delivered by Company, and is a valid and binding obligation of Company and enforceable against Company in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (such exceptions, as applicable to any person, the “
Enforceability Exceptions
”). The execution, delivery and performance of this Commitment Agreement by Company, and the consummation by Company of the transactions contemplated to be undertaken by Company do not (1) violate or conflict with any law or order of any governmental authority applicable to Company, (2) require any governmental approval, (3) violate or conflict with (I) any provision of the
Plan and any documents and instruments governing the Plan as contemplated under ERISA § 404(a)(1)(D) (the “
Plan Governing Documents
”), the certificates or articles of incorporation, bylaws, code of regulations or the comparable governing documents of Company or (II) any law or order of any governmental authority applicable to the Plan Governing Documents, (4) require any governmental approval or (5) require any consent of or other action by any person under, constitute a default or an event that, with or without notice or lapse of time or both, would constitute a default under, or cause or permit termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit under, any provision of any contract to which Company is a
|
b.
|
Independent Fiduciary Representations and Warranties
. Independent Fiduciary hereby represents and warrants to Company and Insurer as of the Commitment Agreement Date and as of the Closing Date, and with respect to paragraph 4.b.iii.4 only, as of any other date on which the Plan Custodian pays cash or assets to Insurer in connection with the transactions contemplated by this Commitment Agreement or the Contract, that:
|
i.
|
Due Organization, Good Standing and Corporate Power
. Independent Fiduciary is a trust company duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts. Independent Fiduciary is duly qualified or licensed to do business and is in good standing in each jurisdiction in which its performance of its obligations in the Commitment Agreement and the transactions contemplated hereunder makes such qualification or licensing necessary, except in such jurisdictions where the failure to be in good standing or so qualified or licensed would not be material. Independent Fiduciary has all requisite power and authority to enter into and carry out its obligations under this Commitment Agreement and to consummate the transactions contemplated to be undertaken by Independent Fiduciary in this Commitment Agreement.
|
ii.
|
Independent Fiduciary Compliance with ERISA
.
|
1.
|
Independent Fiduciary meets the requirements of, and in the transactions contemplated by this Commitment Agreement is acting as, an “investment manager” under ERISA § 3(38), and further constitutes a “qualified professional asset manager” under the U.S. Department of Labor Prohibited Transaction Class Exemption 84-14 solely with respect to the transfer of assets to Insurer in connection with the transactions contemplated by this Commitment Agreement and the Contract (but not the selection of such assets or the management of such assets prior to the transfer).
|
2.
|
Independent Fiduciary has accepted, and has not rescinded or terminated, its designation as the designated fiduciary of the Plan with authority to select one or more insurers to issue one or more group annuity contracts in the IF Engagement Letter (a true and correct copy of which has been provided to Insurer, except that the fees to be paid to Independent Fiduciary have been redacted), and Independent Fiduciary reaffirms its fiduciary status as set forth in the IF Engagement Letter.
|
3.
|
Independent Fiduciary has accepted, and has not rescinded or terminated, appointment as independent fiduciary of the Plan to (I) be the sole fiduciary responsible for selecting one or more insurers to provide annuities in accordance and compliance with the ERISA Requirements, (II) determine whether the transactions contemplated by this Commitment Agreement and in the Contract satisfy ERISA, (III) represent the interests of the Plan and its participants and beneficiaries in connection with the transaction and the negotiation of a commitment agreement and the terms of any agreements with Insurer, including the Contract and the annuity certificates, (IV) direct the Plan Custodian on behalf of the Plan to transfer
|
4.
|
Independent Fiduciary is fully qualified and has the requisite expertise together with its reliance on its consultant, Aon Hewitt Investment Consulting, Inc., and its counsel, Morgan Lewis & Bockius, to serve as an independent fiduciary in connection with the transactions contemplated by this Commitment Agreement, and it is independent of Company and Insurer within the meaning of 29 C.F.R. § 2570.31(j).
|
iii.
|
ERISA-Related Determinations
.
|
1.
|
Independent Fiduciary has selected Insurer to issue the Contract as set forth in this Commitment Agreement and such selection, the transactions contemplated by this Commitment Agreement and the Contract (including its terms) each satisfies the ERISA Requirements.
|
2.
|
The transactions contemplated by this Commitment Agreement and the purchase of the Contract do not result in a transaction prohibited by ERISA § 406 or Code § 4975, for which no statutory exemption or U.S. Department of Labor class exemption is available, provided that the representations in paragraph 4.a.iii and 4.c.iii are true and correct in all material respects as of the Closing Date.
|
3.
|
The Plan (I) will receive no less than “adequate consideration” for the Closing Premium Amount, as adjusted by any [ * * * ] in accordance with paragraphs 3.e and 3.f, and (II) will pay no more than “adequate consideration” for the Contract, in each case within the meaning of “adequate consideration” under ERISA § 408(b)(17)(B) and Code § 4975(f)(10).
|
4.
|
Independent Fiduciary is responsible for exercising independent judgment in evaluating any transactions that the Plan engages in with Insurer (including the purchase of the Contract). Independent Fiduciary is not an affiliate of Insurer and does not have a financial interest, ownership interest or other relationship, agreement or understanding with Insurer that would limit or might otherwise affect its ability to exercise its best judgment as a fiduciary. Independent Fiduciary holds, or has under management or control, total assets of at least $50 million, as described in 29 C.F.R. § 2510.3-21(c)(1)(i)(E) (as amended from time to time). Independent Fiduciary understands that Insurer did not undertake and is not undertaking to provide impartial investment advice, or to give advice in a fiduciary capacity, in connection with any transactions that the Plan engages in with Insurer (including purchase of the Contract) and that Independent Fiduciary is exercising independent judgment in evaluating any such transactions.
|
iv.
|
No Commissions
. No fees, commissions or payments are or will be owed by Independent Fiduciary to any individual or entity in connection with the transactions contemplated by this Commitment Agreement and all other agreements it contemplates for which any other party, or its respective affiliates or representatives, could be liable.
|
v.
|
Enforceability
. This Commitment Agreement is duly executed and delivered by Independent Fiduciary, and is a valid and binding obligation of Independent Fiduciary and enforceable against Independent Fiduciary in accordance with its terms, subject to the Enforceability Exceptions. The execution, delivery and performance of this Commitment Agreement by Independent Fiduciary, and the consummation by Independent Fiduciary of the transactions contemplated to be undertaken by Independent Fiduciary do not (1) violate or conflict with the certificates or articles of incorporation, bylaws, code of regulations or the comparable governing documents of Independent Fiduciary, (2) violate or conflict with any law or order of any governmental authority applicable to Independent Fiduciary, (3) require any governmental approval, (4) violate or conflict with any law or order of any governmental authority applicable to any provision of the
Plan Governing Documents or (5) require any consent of or other action by any person.
|
c.
|
Insurer Representations and Warranties
. Insurer hereby represents and warrants to Company and Independent Fiduciary as of the Commitment Agreement Date and as of the Closing Date that:
|
i.
|
Due Organization, Good Standing and Corporate Power
. Insurer is a life insurance company, duly organized, validly existing and in good standing under the laws of the State of New Jersey. Insurer is duly qualified or licensed to do business and is in good standing in each jurisdiction in which its performance of its obligations in the Commitment Agreement and the transactions contemplated hereunder makes such qualification or licensing necessary, except in such jurisdictions where the failure to be in good standing or so qualified or licensed would not be material. Insurer has all requisite power and authority to enter into and carry out its obligations under this Commitment Agreement and to consummate the transactions contemplated to be undertaken by Insurer in this Commitment Agreement.
|
ii.
|
Compliance with Laws
. The business of insurance conducted by Insurer has been and is being conducted in material compliance with applicable laws.
|
iii.
|
Relationship to the Plan
. Insurer is not (1) a trustee of the Plan (other than a non-discretionary trustee who does not render investment advice with respect to any assets of the Plan), (2) a plan administrator (within the meaning of ERISA § 3(16)(A)) or (3) an employer any of whose employees are covered by the Plan. Schedule 5 sets forth a true and complete list of (I) Insurer and Insurer’s affiliates that are investment managers within the meaning of ERISA § 3(38) and (II) without duplication of clause (I), Insurer and Insurer’s affiliates that are registered as investment advisers under the Investment Advisers Act of 1940; provided, however, that solely with respect to the representation and warranty as to Schedule 5 to be made by Insurer on and as of the Closing Date, Insurer may update Schedule 5 through the Closing Date by providing a written update to Company so that the information included therein is current on and as of the Closing Date.
|
iv.
|
No Post-Closing Liability
. Following the Closing Date, the Plan, Independent Fiduciary and Company and their respective affiliates and representatives will not have any liability to pay any Annuity Payments.
|
v.
|
RBC Ratio
. Insurer’s most recent Projected RBC Ratio is [ * * * ], and, to Insurer’s knowledge, no [ * * * ] has occurred between the date of Insurer’s most recent Projected RBC Ratio and the
|
vi.
|
No Commissions
. No fees, commissions or payments are or will be owed by Insurer to any individual or entity in connection with the transactions contemplated in this Commitment Agreement and all other agreements it contemplates for which any other party, or its respective affiliates or representatives, could be liable. Insurer expressly acknowledges that it has provided no compensation, directly or indirectly, to any consultant or advisor set forth on Schedule 6 retained by Company in connection with the transactions contemplated in this Commitment Agreement.
|
vii.
|
Enforceability
. This Commitment Agreement is duly executed and delivered by Insurer, and is a valid and binding obligation of Insurer and enforceable against Insurer in accordance with its terms, subject to the Enforceability Exceptions. The execution, delivery and performance of this Commitment Agreement by Insurer and the consummation by Insurer of the transactions contemplated to be undertaken by Insurer do not (1) violate or conflict with any provision of its certificates or articles of incorporation, bylaws, code of regulations or the comparable governing documents, (2) except for the filings and approvals of state insurance governmental authorities in the states listed on Schedule 7, violate or conflict with any law or order of any governmental authority applicable to Insurer or (3) require any consent of or other action by any person under, constitute a default or an event that, with or without notice or lapse of time or both, would constitute a default under, or cause or permit termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit under, any provision of any contract to which Insurer is a party, except where the occurrence of any of the foregoing would not have a material adverse effect on Insurer’s ability to consummate the transactions contemplated by this Commitment Agreement. No filing or approval is required to issue the annuity certificates in accordance with the Contract, other than any filing made or approval received as of the date of this Commitment Agreement and filings with and approvals of state insurance governmental authorities in the states listed on Schedule 7.
|
viii.
|
The Contract
. The Contract, when executed contemporaneously with completion of the Closing Date Transfers, will be duly executed and delivered by Insurer and will be a valid and binding obligation of Insurer and enforceable against Insurer by the contract-holder and each Annuitized Life in accordance with its terms, subject to the Enforceability Exceptions. The Contract has been filed and approved by the Connecticut Insurance Department. In the event contract-holder ceases to exist, or notifies Insurer that it will cease to perform its obligations under the Contract, the Contract will remain a valid and binding obligation of Insurer and enforceable against Insurer by each Annuitized Life in accordance with its terms, subject to the Enforceability Exceptions. At all times, the right to a benefit under the Contract, in accordance with the Contract’s terms, will be enforceable by the sole choice of the Annuitized Life to whom the benefit is owed by the Contract, subject to the Enforceability Exceptions.
|
5.
|
Conditions to Close
.
The parties’ obligations to consummate the transaction contemplated by this Commitment Agreement in connection with the Closing, including Independent Fiduciary’s obligation to direct the Plan Custodian to consummate transactions contemplated by this Commitment Agreement, is subject to the condition that no order, decision, injunction (preliminary or otherwise) or judgment entered,
|
6.
|
Administration and Transfer
.
|
a.
|
Administrative Transition
. Company will provide or cause to be provided to Insurer the information reasonably needed to administer the payments under the Contract, including, as necessary, access to subject matter experts to address any questions Insurer may have regarding the benefit provisions, and will complete or cause to be completed all processes set forth in Schedule 8 required of Company, or to be carried out by any affiliates, representatives or service providers of Company, the Plan or Plan Custodian. Company and Insurer will use commercially reasonable efforts to take or cause to be taken all actions and do or cause to be done all things necessary to coordinate the takeover by Insurer of all administration responsibilities necessary to effectively provide recordkeeping and administration services regarding payments under the Contract commencing on [ * * * ]. Company will provide Insurer with final census data in good order on or before [ * * * ] in order for Insurer to provide recordkeeping and administration services regarding payments under the Contract commencing on [ * * * ]. Company and Insurer agree to cooperate with each other in the takeover of such recordkeeping and administration services, including that Company will cooperate with Insurer to ensure any third-party service provider provides Insurer with any information or records relating to the Plan benefits and the Annuitized Lives in its possession that Insurer reasonably requires to perform such services, including any information or records set forth in Schedule 8.
|
b.
|
Call Center and Company Contact
. Representatives of Insurer at its customer service center will from [ * * * ], until Insurer’s call center for this transaction becomes available on [ * * * ], respond to inquiries from Annuitized Lives (or any other caller) by providing a general description, mutually agreed by Insurer and Company, of Insurer’s financial strength, the transfer of benefits (but not advising as to whether a caller is or is not an Annuitized Life) and referring the Annuitized Lives (or any other caller) to the current Plan administration customer line. Company will not and will cause its affiliates and representatives not to release Insurer’s contact information to any Annuitized Life prior to the mailing of the Welcome Kit by Insurer. Insurer will maintain, at its cost and expense, a toll-free phone number and a website (the “
Call Center
”) that will be available starting from [ * * * ] for Annuitized Lives to contact Insurer with questions related to the Contract and the annuity certificates. For a period of five years following the Closing Date, Company will maintain, at its cost and expense, a point of contact (the “
Company Contact
”) that will be available from and after the Closing Date and to which Insurer may refer Annuitized Lives who pose questions related to their Plan benefits. If an Annuitized Life contacts Company with questions related to the Contract and the annuity certificates, Company may refer the Annuitized Life to the Call Center. If an Annuitized Life contacts Insurer with questions related to their Plan benefits, Insurer may refer the Annuitized Life to the Company Contact.
|
c.
|
State Guaranty Association Coverage
. Insurer will pay all assessments due to the applicable state guaranty associations, and will report the Closing Premium Amount on its statutory filings, in each
|
7.
|
Public Announcements and Other Communications
.
|
a.
|
Press Releases
. No party (or its advisors or representatives) to this Commitment Agreement will issue or cause the publication of any press release or public announcement in respect of this Commitment Agreement or the transactions contemplated by this Commitment Agreement without the prior written consent of the other parties (which consent will not be unreasonably withheld, conditioned or delayed), except as may be required by law or applicable securities exchange rules, in which case the party required to publish such press release or public announcement will allow the other parties a reasonable opportunity to comment on such press release or public announcement in advance of such publication. Notwithstanding anything to the contrary in this paragraph 7.a, Company may issue a press release substantially in the form attached as Schedule 9, and Insurer, within two business days following Company’s issuance of its press release, may issue a statement on its website substantially in the form attached as Schedule 10, and each party may reasonably respond to inquiries from the news media following the publication of such press releases and such party will notify the other parties of any such inquiries.
|
b.
|
No Insurer Communications
. From the Commitment Agreement Date until the issuance of any annuity certificate by Insurer to an annuitant, other than as provided for in this Commitment Agreement, without Company’s prior written consent, (i) Insurer will cause the employees of its retirement services business unit not to initiate any contact or communication with any participant or beneficiary of the Plan in connection with any transactions other than those transactions contemplated by this Commitment Agreement and (ii) Insurer will not, and will cause all of its affiliates not to, provide any of their respective insurance agents, wholesalers, retailers or other representatives with any contact information of such participants and beneficiaries of the Plan obtained from Company or any of its representatives in connection with the transactions contemplated by this Commitment Agreement, except for those representatives of Insurer or any of their respective affiliates who need to know such information for purposes of the transactions contemplated by this Commitment Agreement and agree to comply with the requirements of this Commitment Agreement. However, this paragraph 7.b will not restrict employees of Insurer’s retirement services business unit from contacting any participant or beneficiary of the Plan in connection with, or to facilitate, Insurer’s performance of its obligations under the Contract, the annuity certificates or this Commitment Agreement. Until the issuance of an annuity certificate by Insurer to an annuitant, other than as provided for in this Commitment Agreement, if any participant or beneficiary of the Plan contacts an employee of Insurer’s retirement services business unit, Insurer and Company will cooperate to coordinate a response to such participant or beneficiary of the Plan.
|
c.
|
Sale or Promotion of Insurer’s Other Products
. From the Commitment Agreement Date until the date that is [ * * * ], Insurer agrees that neither it nor its affiliates, respective insurance agents, wholesalers, employees, brokers, retailers or other representatives will use Confidential Information with respect to prospective Annuitized Lives to contact Annuitized Lives to sell or promote its other products. Nothing in this paragraph 7.c will prohibit Insurer or its affiliates, respective insurance agents, wholesalers, employees, brokers, retailers or other representatives who (i) already knew the Confidential Information prior to the confidential disclosure by Company, (ii) independently developed
|
d.
|
SEC Filings
. If Company concludes that disclosure of this Commitment Agreement is required by the rules of the Securities and Exchange Commission (“
SEC
”), (i) Company and Insurer will cooperate to make an application by Company with the SEC for confidential treatment of information relating to the pricing of the Contract and such other information as Company and Insurer mutually conclude is competitively sensitive from the perspective of Company or Insurer or otherwise merits confidential treatment and (ii) Company will include Insurer in any material correspondence (written or oral) with the SEC regarding such application for confidential treatment, and Company and Insurer will otherwise reasonably cooperate in connection with such application, including by Company proposing to redact confidential portions of documents as to which the SEC staff seeks disclosure.
|
8.
|
Welcome Kit and Annuity Certificates
.
|
a.
|
Cooperation
. Insurer, Company and Independent Fiduciary will cooperate in good faith to agree on communications to be provided prior to the Interim Data Finalization Date (or delivery of annuity certificates, if later) to annuitants, including the Welcome Kit and the annuity certificates; provided, however, that the annuity certificates will provide that the annuitant has the right to enforce all provisions of the Contract, including provisions with respect to such annuitant’s Annuity Payments, solely against Insurer and against no other person including the Plan, Independent Fiduciary, Company or any affiliate thereof.
|
b.
|
Welcome Kit
. On or before [ * * * ], Insurer will mail a welcome kit to annuitants under the Contract (the “
Welcome Kit
”); provided, that Insurer will begin the process of mailing the Welcome Kit by [ * * * ]. Insurer will send a preliminary draft of the Welcome Kit to Company and Independent Fiduciary as soon as practicable, and Insurer will consider in good faith any comments made by Company or Independent Fiduciary on or before five business days after they receive the preliminary draft of the Welcome Kit from Insurer.
|
c.
|
Annuity Certificates
. Insurer will use commercially reasonable efforts to obtain all regulatory approvals that are necessary for the issuance of any annuity certificate. Insurer will mail an annuity certificate to (i) each immediate annuitant by [ * * * ] and (ii) each deferred annuitant no more than [ * * * ] following the mailing of the Welcome Kit, subject to receiving regulatory approvals for any such annuity certificate, if needed. To the extent that any changes are made to the forms of annuity certificates or the related benefit terms after Company, Insurer and Independent Fiduciary have agreed on the forms of annuity certificates to be filed and the related benefit terms, the mailing of an annuity certificate to each applicable annuitant will be extended by the number of days elapsed since Company, Insurer and Independent Fiduciary had first agreed on the form of such annuity certificate and the related benefit terms. Notwithstanding anything to the contrary in this paragraph 8.c, in the event that Insurer has not been provided with the Required Data for any annuitant, contingent annuitant, deferred annuitant, dependent spouse, alternate payee, beneficiary or any other payee, Insurer may delay the mailing of the Welcome Kit and annuity certificate to such annuitant, contingent annuitant, deferred
|
d.
|
Claims Procedures
. From and after the Annuity Commencement Date, Insurer will maintain written rules and procedures to govern the submission to Insurer of claims, claims appeals and requests by Annuitized Lives regarding Annuity Payments. Such written rules and procedures will be otherwise consistent with Insurer’s standard rules and procedures for handling inquiries from annuitants covered by its group annuity contracts, as the same may change from time to time.
|
9.
|
Indemnification by Insurer
.
From and after the Closing, Insurer agrees to indemnify, defend and hold Company, the Plan, Independent Fiduciary and any other person acting as fiduciary or agent for the Plan and their respective affiliates, officers, directors, stockholders, employees, agents and other representatives (each, an “
Indemnified Party
”) harmless from and against any and all liabilities (in each case, including reasonable out-of-pocket expenses and reasonable fees and expenses of counsel) to the extent arising out of or relating to the portion of any action, lawsuit, proceeding, investigation, demand or other claim against the Indemnified Party by a third party that is threatened or brought against or that involves an Indemnified Party and that arises out of or relates to any failure, or alleged failure, by Insurer to perform or comply with the terms of the Contract including making the payments in respect of the Annuitized Lives to be made pursuant to the Contract (collectively, “
Indemnified Claims
”).
|
a.
|
Procedures for Indemnification Claims
.
|
i.
|
Any Indemnified Party making a claim for indemnification for Indemnified Claims under this paragraph 9 will notify Insurer of each Indemnified Claim in writing, promptly after receiving notice of such, describing the Indemnified Claim, the amount thereof (if known and quantifiable) and the basis thereof in reasonable detail. However, an Indemnified Party’s failure to notify Insurer will not relieve Insurer of its obligations under this paragraph 9 except to the extent that (and only to the extent that) such failure caused or would reasonably be expected to cause, the indemnifiable liabilities to be greater than such liabilities would have been had the Indemnified Party given Insurer prompt notice.
|
ii.
|
Insurer will have the right at any time to assume the defense against any Indemnified Claim with counsel of choice reasonably satisfactory to the Indemnified Party and control the defense of such Indemnified Claim.
|
iii.
|
From and after the date that Insurer has assumed and is conducting the defense of an Indemnified Claim in accordance with paragraph 9.a.ii, (1) each Indemnified Party may retain separate co-counsel at its sole cost and expense and participate in, but not control, the defense of such Indemnified Claim, (2) each Indemnified Party may retain separate counsel at its sole cost and expense to control the defense of any portion of the action, lawsuit, proceeding, investigation, demand or other claim against the Indemnified Party that is not an Indemnified Claim (the “
Uncovered Claim
”), (3) Insurer and the Indemnified Party will cooperate fully with each other and any of their respective counsel in connection with the defense, negotiation or settlement of any such Indemnified Claim or (if the Indemnified Party retains counsel for the Uncovered Claim) the Uncovered Claim, including providing access to any relevant books and records, properties, employees and representatives, provided that, for avoidance of doubt, the foregoing will not require
|
iv.
|
If Insurer has not assumed the defense of an Indemnified Claim after receiving notice of the Indemnified Claim, (1) the Indemnified Party may defend against the Indemnified Claim in any manner it reasonably determines to be appropriate, (2) Insurer will reimburse the Indemnified Party promptly and periodically for the costs of defending against the Indemnified claim (including reasonable attorneys’ fees and expenses allocable to such Indemnified Claim) to the extent such costs are liabilities for which the Indemnified Party is entitled to indemnification under this paragraph 9 and (3) Insurer will remain responsible for any costs the Indemnified Party may incur resulting from the Indemnified Claim to the extent such costs are liabilities for which the Indemnified Party is entitled to indemnification under this paragraph 9. If the Indemnified Party has not assumed the defense of an Uncovered Claim as contemplated by paragraph 9.a.iii, Insurer is not responsible in any way for any liabilities or orders resulting from not responding to or defending such Uncovered Claim, provided that Insurer’s responsibility for Indemnified Claims will not be altered in any way.
|
v.
|
Notwithstanding anything in this Commitment Agreement to the contrary, this paragraph 9 will not be deemed to supersede or extinguish any rights of Independent Fiduciary or Company pursuant to the IF Engagement Letter.
|
b.
|
Claims, Payment and Treatment of Payments
. On each occasion that any Indemnified Party is entitled to indemnification under this paragraph 9, Insurer will, at each such time, promptly pay the amount of such indemnification within ten business days following receipt of an invoice for out-of-pocket expense, fees or other amounts for which it is liable under this paragraph 9. Any indemnification payments made pursuant to this Commitment Agreement will be treated for tax purposes as an adjustment to the premium for the Contract, unless otherwise required by applicable law.
|
10.
|
Confidentiality
.
It is understood that, in connection with the negotiation of this Commitment Agreement as well as in previous discussions and interactions involving the matters addressed by this Commitment Agreement, each party has received and will receive from the other parties business and technical information or processes, stored in any medium, to the extent the same is reasonably construed or generally accepted as containing a trade secret, proprietary or confidential information of or belonging to any party, its representatives, its affiliates or its affiliates’ representatives, including Company and Plan administrative practices, [ * * * ], know-how and trade secrets, customer or client requirements and lists, [ * * * ], technology, software and data processing procedures, insurance, actuarial, accounting and financial data, management systems, records and any other information that is designated as confidential, the portions
|
a.
|
This paragraph 10 will not apply with respect to Confidential Information that the receiving party can demonstrate is or was (i) already known to the receiving party or its affiliates or representatives prior to the confidential disclosure by the disclosing party or any of its affiliates or representatives, other than through a breach of an obligation of confidentiality of the disclosing party, (ii) independently developed by the receiving party or its affiliates or representatives not in violation or breach of this Commitment Agreement or any other confidentiality obligation to the disclosing party (such as the IFID NDA, the Company NDA or any retention agreement with a firm or professional in connection with this Commitment Agreement), (iii) already known to the public without breach of confidence by the receiving party or any of its affiliates, (iv) received by the receiving party from a third party without restrictions on its use in favor of the disclosing party, whether by law or contract, or (v) subject to prior compliance with paragraph 10.b, required to be disclosed pursuant to any applicable law, stock exchange regulation, regulatory agreement, provision or request, court order, subpoena or other legal process.
|
b.
|
This paragraph 10 will not apply from and after the Closing to restrict the use or disclosure by Insurer of any Confidential Information related to [ * * * ] received from another disclosing party, provided that Insurer will use such Confidential Information only in compliance with all applicable laws relating to privacy of personally identifying information. For the avoidance of doubt, this paragraph 10.b does not apply to Confidential Information regarding Company or the Plan (other than to the extent required in connection with the Contract).
|
c.
|
Except as otherwise provided in this Commitment Agreement, if any party, its representatives, its affiliates or its affiliates’ representatives receives a request, subpoena, demand or order for disclosure or becomes required by law or stock exchange rule or regulation to disclose any Confidential Information (a “
Compelled Disclosing Party
”), such Compelled Disclosing Party will, if legally permissible, promptly, and in no case more than five business days following receipt of such a request,
|
d.
|
Any engagement letter between any of the parties, on the one hand, and each professional engaged in connection with this Commitment Agreement, on the other hand, will include undertakings by such professional to maintain the confidentiality of Confidential Information in accordance with this paragraph 10 and to clearly mark any reports or other work product prepared in connection with such engagement as confidential and not subject to disclosure except as permitted by this paragraph 10.
|
e.
|
Insurer will comply with all applicable laws and regulations, including those laws relating to privacy, data protection and the safeguarding of such information, governing the confidential information of any Annuitized Life. Insurer will comply in all material respects with any internal written policies relating to the confidential information of any Annuitized Life as in effect from time to time.
|
f.
|
The parties acknowledge and agree that this paragraph 10 will supersede the Company NDA or the IFID NDA. Notwithstanding the foregoing, this paragraph 10.f will not relieve any party from liability for breaches of the Company NDA or the IFID NDA that have occurred prior to the date of this Commitment Agreement.
|
11.
|
Termination
.
|
a.
|
Termination
. This Commitment Agreement may be terminated at any time before the Closing Date by Company or Insurer:
|
i.
|
If the Closing has not occurred by or on [ * * * ] (the “
Outside Date
”), provided that such right to terminate this Commitment Agreement will not be available to a party to this Commitment Agreement if any of its actions or failures to perform any of its obligations under this Commitment Agreement resulted in the failure of the Closing to occur on or before the Outside Date, and provided, further that in the event the Closing does not occur on or prior to [ * * * ], Company may deliver a request to Insurer on or prior to [ * * * ] that the Closing Date be extended and, if Company timely delivers such a notice to Insurer, (I) Insurer will use commercially reasonable efforts to deliver to Company and Independent Fiduciary a written, good-faith revision of the Closing Premium Amount by no later than [ * * * ] (a “
Re-Pricing Offer
”), [ * * * ], (II) Company will deliver
|
ii.
|
If the other party has materially breached its obligations with respect to this Commitment Agreement and not cured the breach within 30 days after written notice by the non-breaching party (without limiting any other rights of the non-breaching party); or
|
iii.
|
By mutual agreement between Company and Insurer.
|
b.
|
Effect of Termination and Survival
. If this Commitment Agreement is terminated pursuant to this paragraph 11, all rights and obligations of the parties under this Commitment Agreement will terminate upon such termination and will become null and void, except that paragraphs 10 (Confidentiality), 12 (Definitions), 13 (Miscellaneous) and this paragraph 11.b (Effect of Termination and Survival) will survive any such termination and no party will otherwise have any liability to any other party under this Commitment Agreement. However, nothing in this paragraph 11.b will relieve any party from liability for any fraud or willful and material breach of this Commitment Agreement.
|
12.
|
Definitions
.
For purposes of this Commitment Agreement, the following defined terms will have the following meanings:
|
a.
|
[ * * * ]
|
b.
|
“
Annuitized Life
” means each annuitant, contingent annuitant, deferred annuitant, dependent spouse, alternate payee, beneficiary or any other payee, in each case, as set forth on the annuity exhibit to the Contract.
|
c.
|
“
Annuity Commencement Date
” means [ * * * ].
|
d.
|
“
Annuity Exhibit File
” is defined in paragraph 2.b.
|
e.
|
“
Annuity Payment
” has the meaning provided in the Contract.
|
f.
|
“
Asset Eligibility Criteria
” is defined in Schedule 11.
|
g.
|
“
Base File
” means the tabs [ * * * ] in the data file titled [ * * * ] provided by Company (via Mercer (US) Inc.) to Insurer via the Mercer Pension Risk Exchange at 7:03 p.m. eastern daylight time on [ * * * ].
|
h.
|
“
Call Center
” is defined in paragraph 6.b.
|
i.
|
“
Check Register
” is defined in Schedule 8.
|
j.
|
“
Closing
” is defined in paragraph 1.
|
k.
|
“
Closing Date
” is defined in paragraph 1.
|
l.
|
“
Closing Date Transfers
” is defined in paragraph 3.a.
|
m.
|
“
Closing Premium Amount
” is defined in paragraph 3.a.
|
n.
|
“
Code
” means the Internal Revenue Code of 1986, as amended, and the applicable Treasury Regulations issued thereunder.
|
o.
|
“
Commitment Agreement
” is defined in the preamble.
|
p.
|
“
Commitment Agreement Date
” is defined in the title of this Commitment Agreement.
|
q.
|
“
Company
” is defined in the preamble.
|
r.
|
“
Company Contact
” is defined in paragraph 6.b.
|
s.
|
“
Company NDA
” means the Non-Disclosure Agreement, dated February 15, 2017, between Company and Insurer.
|
t.
|
“
Compelled Disclosing Party
” is defined in paragraph 10.c.
|
u.
|
“
Confidential Information
” is defined in paragraph 10.
|
v.
|
“
Contract
” is defined in the preamble.
|
w.
|
“
Contract Issuance
” is defined in paragraph 2.
|
x.
|
[ * * * ]
|
y.
|
[ * * * ]
|
z.
|
[ * * * ]
|
aa.
|
“
Data Changes
” is [ * * * ].
|
bb.
|
“
Data Corrections
” is [ * * * ].
|
cc.
|
“
Data Exception Payee
” means [ * * * ].
|
dd.
|
“
Data Finalization Date
” means 20 business days before the Final True-Up Date.
|
ee.
|
“
Data Load File
” is defined in Schedule 8.
|
ff.
|
“
Data Load File Sign-Off
” is defined in Schedule 8.
|
gg.
|
[ * * * ]
|
hh.
|
“
Eligible Asset
” means each asset listed on Schedule 2 that [ * * * ].
|
ii.
|
“
Enforceability Exceptions
” is defined in paragraph 4.a.viii.
|
jj.
|
“
ERISA
” means Employee Retirement Income Security Act of 1974, as amended, and any federal agency regulations promulgated thereunder that are currently in effect and applicable.
|
kk.
|
“
ERISA Requirements
” means all of the applicable requirements of ERISA and applicable guidance promulgated thereunder, including Interpretive Bulletin 95-1.
|
ll.
|
“
Fair Market Value
” means the fair market value for [ * * * ] as of the close of business on the [ * * * ] including, without duplication [ * * * ] as indicated by the [ * * * ]. If the [ * * * ] is not available or no fair market values are indicated for [ * * * ] by [ * * * ] the fair market value for such [ * * * ] will be determined by [ * * * ]. If the [ * * * ] is not available or no fair market values are indicated for [ * * * ] the fair market value for such [ * * * ] will be determined by [ * * * ]. The [ * * * ] as of the close of business [ * * * ] will be used in determining fair market value. For certain [ * * * ], fair market value will be determined by [ * * * ]. In any case, the market value of [ * * * ] will be determined by the [ * * * ] effective for the [ * * * ]. For purposes of paragraph [ * * * ], which relates to [ * * * ] the reference in this definition to [ * * * ] will instead refer to [ * * * ]. Any such updated [ * * * ] shall only be based on [ * * * ] and shall not take into account any [ * * * ] made on or after [ * * * ].
|
mm.
|
“
Final [ * * * ]
” is [ * * * ].
|
nn.
|
“
Final Production Data File
” is defined in Schedule 8.
|
oo.
|
“
Final True-Up Date
” means the date that is 78 days after the date on which the mailing of annuity certificates pursuant to paragraph 9.c is completed.
|
pp.
|
“
Final True-Up File
” is defined in paragraph 3.f.i.
|
qq.
|
[ * * * ]
|
rr.
|
“
IF Engagement Letter
” is defined in paragraph 4.a.v.
|
ss.
|
“
IFID NDA
” means the Non-Disclosure Agreement, dated March 23, 2017, between Independent Fiduciary and Insurer.
|
tt.
|
“
Independent Fiduciary
” is defined in the preamble.
|
uu.
|
“
Indemnified Claims
” is defined in paragraph 9.
|
vv.
|
“
Indemnified Party
” is defined in paragraph 9.
|
ww.
|
[ * * * ]
|
xx.
|
“
Insurer
” is defined in the preamble.
|
yy.
|
[ * * * ]
|
zz.
|
“
Interim Data Finalization Date
” means [ * * * ].
|
bbb.
|
“
Interim True-Up Date
” means [ * * * ].
|
ccc.
|
"
Interim True-Up File
” is defined in paragraph 3.e.i.
|
ddd.
|
“
Lien
” means any lien, mortgage, security interest, pledge, deposit, encumbrance, restrictive covenant or other similar restriction.
|
eee.
|
[ * * * ]
|
jjj.
|
“
Outside Date
” is defined in paragraph 11.a.i.
|
13.
|
Miscellaneous
.
The parties each hereby acknowledge that they jointly and equally participated in the drafting of this Commitment Agreement and all other agreements it contemplates, and no presumption will be made that any provision of this Commitment Agreement will be construed against any party by reason of such role in the drafting of this Commitment Agreement or any other agreement contemplated hereby. The Schedules to this Commitment Agreement are incorporated by reference and made a part of this Commitment Agreement as if set forth fully in this Commitment Agreement. No amendment of any of the provisions of this Commitment Agreement will be effective unless set forth in writing and signed by each party. No waiver by any party of any of the provisions of this Commitment Agreement will be effective unless explicitly set forth in writing and signed by the party so waiving. No failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Commitment Agreement will operate or be construed as a waiver thereof; nor will any single or partial exercise of any right, remedy, power or privilege under this Commitment Agreement preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.
|
THE HARTFORD FINANCIAL SERVICES GROUP, INC., acting solely in its capacity as Plan Sponsor and Settlor of the Plan
|
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA |
By: ____________________________________
|
By: ____________________________________
|
Print Name: _____________________________
|
Print Name: _____________________________
|
Title: ___________________________________
|
Title: ___________________________________
|
STATE STREET GLOBAL ADVISORS TRUST COMPANY, acting solely in its capacity as Independent Fiduciary of the Plan
|
|
By: ____________________________________
|
|
Print Name: _____________________________
|
|
Title: ___________________________________
|
|
|
|
|
|
Form S-3 Registration No.
|
|
|
Form S-8 Registration Nos.
|
|
|
|
|
333-212778
|
|
|
333-105707
|
|
|
|
333-49170
|
|
|
|
333-105706
|
|
|
|
333-34092
|
|
|
|
033-80665
|
|
|
|
333-12563
|
|
|
|
333-125489
|
|
|
|
333-157372
|
|
|
|
333-160173
|
|
|
|
333-168537
|
|
|
|
333-197671
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of The Hartford Financial Services Group, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
July 27, 2017
|
/s/ Christopher J. Swift
|
|
|
Christopher J. Swift
|
|
|
Chief Executive Officer
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of The Hartford Financial Services Group, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
July 27, 2017
|
/s/ Beth A Bombara
|
|
|
Beth A Bombara
|
|
|
Executive Vice President and Chief Financial Officer
|
1)
|
The Report fully complies with the requirements of section 13(a) or section 15(d) of the Securities Exchange Act of 1934; and
|
2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date:
|
July 27, 2017
|
/s/ Christopher J. Swift
|
|
|
Christopher J. Swift
|
|
|
Chief Executive Officer
|
1)
|
The Report fully complies with the requirements of section 13(a) or section 15(d) of the Securities Exchange Act of 1934; and
|
2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date:
|
July 27, 2017
|
/s/ Beth A Bombara
|
|
|
Beth A Bombara
|
|
|
Executive Vice President and Chief Financial Officer
|