☒
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
|
13-3317783
|
(State or other jurisdiction of incorporation or organization)
|
|
(I.R.S. Employer Identification No.)
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Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
Common Stock, par value $0.01 per share
|
HIG
|
The New York Stock Exchange
|
6.10% Notes due October 1, 2041
|
HIG 41
|
The New York Stock Exchange
|
7.875% Fixed-to-Floating Rate Junior Subordinated Debentures due 2042
|
HGH
|
The New York Stock Exchange
|
Depositary Shares, Each Representing a 1/1,000th Interest in a Share of 6.000% Non-Cumulative Preferred Stock, Series G, par value $0.01 per share
|
HIG PR G
|
The New York Stock Exchange
|
Indicate by check mark:
|
|
|
|
|
|
|
|
|
|
• whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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Yes
|
☒
|
No
|
☐
|
|
|
|
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• whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
|
Yes
|
☒
|
No
|
☐
|
|
|
|
|
|
• 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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|
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Large accelerated filer
|
☒
|
Accelerated filer
|
☐
|
Non-accelerated filer
|
☐
|
Smaller reporting company
|
☐
|
Emerging growth company
|
☐
|
• whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
|
Yes
|
☐
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No
|
☒
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Item
|
Description
|
Page
|
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1.
|
FINANCIAL STATEMENTS
|
|
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
|
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018
|
|
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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018
|
|
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CONDENSED CONSOLIDATED BALANCE SHEETS - AS OF SEPTEMBER 30, 2019 AND DECEMBER 31, 2018
|
|
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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018
|
|
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CONDENSED CONOLIDATED STATEMENTS OF CASH FLOWS - FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018
|
|
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
|
2.
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
[a]
|
4.
|
CONTROLS AND PROCEDURES
|
|
|
|
|
1.
|
LEGAL PROCEEDINGS
|
|
1A.
|
RISK FACTORS
|
|
2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
|
6.
|
EXHIBITS
|
|
|
EXHIBITS INDEX
|
|
|
SIGNATURE
|
•
|
Risks Relating to Economic, Political and Global Market Conditions:
|
◦
|
challenges related to the Company’s current operating environment, including global political, economic and market conditions, and the effect of financial market disruptions, economic downturns, changes in trade regulation including tariffs and other barriers or other potentially adverse macroeconomic developments on the demand for our products and returns in our investment portfolios;
|
◦
|
market risks associated with our business, including changes in credit spreads, equity prices, interest rates, inflation rate, and market volatility;
|
◦
|
the impact on our investment portfolio if our investment portfolio is concentrated in any particular segment of the economy;
|
◦
|
the impacts of changing climate and weather patterns on our businesses, operations and investment portfolio including on claims, demand and pricing of our products, the availability and cost of reinsurance, our modeling data used to evaluate and manage risks of catastrophes and severe weather events, the value of our investment portfolios and credit risk with reinsurers and other counterparties;
|
◦
|
the risks associated with the change in or replacement of the London Inter-Bank Offered Rate ("LIBOR") on the securities we hold or may have issued, other financial instruments and any other assets and liabilities whose value is tied to LIBOR;
|
◦
|
the impacts associated with the withdrawal of the United Kingdom (“U.K.”) from the European Union (“E.U.”) on our international operations in the U.K. and E.U.
|
•
|
Insurance Industry and Product-Related Risks:
|
◦
|
the possibility of unfavorable loss development, including with respect to long-tailed exposures;
|
◦
|
the significant uncertainties that limit our ability to estimate the ultimate reserves necessary for asbestos and environmental claims;
|
◦
|
the possibility of a pandemic, earthquake, or other natural or man-made disaster that may adversely affect our businesses;
|
◦
|
weather and other natural physical events, including the intensity and frequency of storms, hail, wildfires, flooding, winter storms, hurricanes and tropical storms, as well as climate change and its potential impact on weather patterns;
|
◦
|
the possible occurrence of terrorist attacks and the Company’s inability to contain its exposure as a result of, among other factors, the inability to exclude coverage for terrorist attacks from workers' compensation policies and limitations on reinsurance coverage from the federal government under applicable laws;
|
◦
|
the Company’s ability to effectively price its 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;
|
◦
|
technological changes, such as usage-based methods of determining premiums, advancements 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;
|
•
|
Financial Strength, Credit and Counterparty Risks:
|
◦
|
risks to our business, financial position, prospects and results associated with negative rating actions or downgrades in the Company’s financial strength and credit ratings or negative rating actions or downgrades relating to our investments;
|
◦
|
capital requirements which are subject to many factors, including many that are outside the Company’s control, such as NAIC risk based capital formulas, Funds at Lloyd's and Solvency Capital Requirement, which can in turn affect our credit and financial strength ratings, cost of capital, regulatory compliance and other aspects of our business and results;
|
◦
|
losses due to nonperformance or defaults by others, including credit risk with counterparties associated with investments, derivatives, premiums receivable, reinsurance recoverables and indemnifications provided by third parties in connection with previous dispositions;
|
◦
|
the potential for losses due to our reinsurers' unwillingness or inability to meet their obligations under reinsurance contracts and the availability, pricing and adequacy of reinsurance to protect the Company against losses;
|
◦
|
state and international regulatory limitations on the ability of the Company and certain of its subsidiaries to declare and pay dividends;
|
•
|
Risks Relating to Estimates, Assumptions and Valuations:
|
◦
|
risk associated with the use of analytical models in making decisions in key areas such as underwriting, pricing, capital management, reserving, investments, reinsurance and catastrophe risk management;
|
◦
|
the potential for differing interpretations of the methodologies, estimations and assumptions that underlie the Company’s fair value estimates for its investments and the evaluation of other-than-temporary impairments on available-for-sale securities;
|
◦
|
the potential for further impairments of our goodwill or the potential for changes in valuation allowances against deferred tax assets;
|
•
|
Strategic and Operational Risks:
|
◦
|
the Company’s ability to maintain the availability of its systems and safeguard the security of its data in the event of a disaster, cyber or other information security incident or other unanticipated event;
|
◦
|
the potential for difficulties arising from outsourcing and similar third-party relationships;
|
◦
|
the risks, challenges and uncertainties associated with capital management plans, expense reduction initiatives and other actions, which may include acquisitions, divestitures or restructurings;
|
◦
|
risks associated with acquisitions and divestitures, including the challenges of integrating acquired companies or businesses or separating from our divested businesses, which may result in our inability to achieve the anticipated benefits and synergies and may result in unintended consequences;
|
◦
|
difficulty in attracting and retaining talented and qualified personnel, including key employees, such as executives, managers and employees with strong technological, analytical and other specialized skills;
|
◦
|
the Company’s ability to protect its intellectual property and defend against claims of infringement;
|
•
|
Regulatory and Legal Risks:
|
◦
|
the cost and other potential effects of increased federal, state and international regulatory and legislative developments, including those that could adversely impact the demand for the Company’s products, operating costs and required capital levels;
|
◦
|
unfavorable judicial or legislative developments;
|
◦
|
the impact of changes in federal or state tax laws;
|
◦
|
regulatory requirements that could delay, deter or prevent a takeover attempt that stockholders might consider in their best interests; and
|
◦
|
the impact of potential changes in accounting principles and related financial reporting requirements.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||
(in millions, except for per share data)
|
2019
|
2018
|
|
2019
|
2018
|
||||||||
|
(Unaudited)
|
||||||||||||
Revenues
|
|
|
|
|
|
||||||||
Earned premiums
|
$
|
4,394
|
|
$
|
3,987
|
|
|
$
|
12,500
|
|
$
|
11,872
|
|
Fee income
|
330
|
|
344
|
|
|
970
|
|
994
|
|
||||
Net investment income
|
490
|
|
444
|
|
|
1,448
|
|
1,323
|
|
||||
Net realized capital gains (losses):
|
|
|
|
|
|
||||||||
Total other-than-temporary impairment ("OTTI") losses
|
(1
|
)
|
(4
|
)
|
|
(5
|
)
|
(6
|
)
|
||||
OTTI losses recognized in other comprehensive income (“OCI”)
|
—
|
|
3
|
|
|
2
|
|
5
|
|
||||
Net OTTI losses recognized in earnings
|
(1
|
)
|
(1
|
)
|
|
(3
|
)
|
(1
|
)
|
||||
Other net realized capital gains
|
90
|
|
39
|
|
|
335
|
|
61
|
|
||||
Total net realized capital gains
|
89
|
|
38
|
|
|
332
|
|
60
|
|
||||
Other revenues
|
44
|
|
29
|
|
|
129
|
|
73
|
|
||||
Total revenues
|
5,347
|
|
4,842
|
|
|
15,379
|
|
14,322
|
|
||||
Benefits, losses and expenses
|
|
|
|
|
|
||||||||
Benefits, losses and loss adjustment expenses
|
2,914
|
|
2,786
|
|
|
8,533
|
|
8,219
|
|
||||
Amortization of deferred policy acquisition costs ("DAC")
|
437
|
|
348
|
|
|
1,184
|
|
1,034
|
|
||||
Insurance operating costs and other expenses
|
1,167
|
|
1,091
|
|
|
3,356
|
|
3,195
|
|
||||
Loss on extinguishment of debt
|
90
|
|
—
|
|
|
90
|
|
6
|
|
||||
Loss on reinsurance transaction
|
—
|
|
—
|
|
|
91
|
|
—
|
|
||||
Interest expense
|
67
|
|
69
|
|
|
194
|
|
228
|
|
||||
Amortization of other intangible assets
|
19
|
|
18
|
|
|
47
|
|
54
|
|
||||
Total benefits, losses and expenses
|
4,694
|
|
4,312
|
|
|
13,495
|
|
12,736
|
|
||||
Income from continuing operations, before tax
|
653
|
|
530
|
|
|
1,884
|
|
1,586
|
|
||||
Income tax expense
|
118
|
|
103
|
|
|
347
|
|
297
|
|
||||
Income from continuing operations, net of tax
|
535
|
|
427
|
|
|
1,537
|
|
1,289
|
|
||||
Income from discontinued operations, net of tax
|
—
|
|
5
|
|
|
—
|
|
322
|
|
||||
Net income
|
535
|
|
432
|
|
|
1,537
|
|
1,611
|
|
||||
Preferred stock dividends
|
11
|
|
—
|
|
|
16
|
|
—
|
|
||||
Net income available to common stockholders
|
$
|
524
|
|
$
|
432
|
|
|
$
|
1,521
|
|
$
|
1,611
|
|
|
|
|
|
|
|
||||||||
Income from continuing operations, net of tax, available to common stockholders per common share
|
|
|
|
|
|
||||||||
Basic
|
$
|
1.45
|
|
$
|
1.19
|
|
|
$
|
4.21
|
|
$
|
3.60
|
|
Diluted
|
$
|
1.43
|
|
$
|
1.17
|
|
|
$
|
4.17
|
|
$
|
3.54
|
|
Net income available to common stockholders per common share
|
|
|
|
|
|
|
|||||||
Basic
|
$
|
1.45
|
|
$
|
1.20
|
|
|
$
|
4.21
|
|
$
|
4.50
|
|
Diluted
|
$
|
1.43
|
|
$
|
1.19
|
|
|
$
|
4.17
|
|
$
|
4.42
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||
(in millions)
|
2019
|
2018
|
|
2019
|
2018
|
||||||||
|
(Unaudited)
|
||||||||||||
Net income
|
$
|
535
|
|
$
|
432
|
|
|
$
|
1,537
|
|
$
|
1,611
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
||||||||
Changes in net unrealized gain on securities
|
401
|
|
(171
|
)
|
|
1,744
|
|
(2,164
|
)
|
||||
Changes in OTTI losses recognized in other comprehensive income
|
—
|
|
(1
|
)
|
|
1
|
|
(1
|
)
|
||||
Changes in net gain on cash flow hedging instruments
|
6
|
|
(5
|
)
|
|
22
|
|
(37
|
)
|
||||
Changes in foreign currency translation adjustments
|
(4
|
)
|
1
|
|
|
—
|
|
(4
|
)
|
||||
Changes in pension and other postretirement plan adjustments
|
9
|
|
10
|
|
|
26
|
|
29
|
|
||||
OCI, net of tax
|
412
|
|
(166
|
)
|
|
1,793
|
|
(2,177
|
)
|
||||
Comprehensive income (loss)
|
$
|
947
|
|
$
|
266
|
|
|
$
|
3,330
|
|
$
|
(566
|
)
|
(in millions, except for share and per share data)
|
September 30,
2019 |
December 31, 2018
|
||||
|
(Unaudited)
|
|
||||
Assets
|
|
|||||
Investments:
|
|
|
||||
Fixed maturities, available-for-sale, at fair value (amortized cost of $40,174 and $35,603)
|
$
|
42,389
|
|
$
|
35,652
|
|
Fixed maturities, at fair value using the fair value option
|
39
|
|
22
|
|
||
Equity securities, at fair value
|
1,414
|
|
1,214
|
|
||
Mortgage loans (net of allowances for loan losses of $0 and $1)
|
3,736
|
|
3,704
|
|
||
Limited partnerships and other alternative investments
|
1,770
|
|
1,723
|
|
||
Other investments
|
302
|
|
192
|
|
||
Short-term investments
|
2,927
|
|
4,283
|
|
||
Total investments
|
52,577
|
|
46,790
|
|
||
Cash
|
207
|
|
112
|
|
||
Restricted cash
|
83
|
|
9
|
|
||
Premiums receivable and agents’ balances, net
|
4,580
|
|
3,995
|
|
||
Reinsurance recoverables, net
|
5,333
|
|
4,357
|
|
||
Deferred policy acquisition costs
|
772
|
|
670
|
|
||
Deferred income taxes, net
|
376
|
|
1,248
|
|
||
Goodwill
|
1,913
|
|
1,290
|
|
||
Property and equipment, net
|
1,194
|
|
1,006
|
|
||
Other intangible assets, net
|
1,126
|
|
657
|
|
||
Other assets
|
2,095
|
|
2,173
|
|
||
Total assets
|
$
|
70,256
|
|
$
|
62,307
|
|
Liabilities
|
|
|
||||
Unpaid losses and loss adjustment expenses
|
$
|
36,188
|
|
$
|
33,029
|
|
Reserve for future policy benefits
|
645
|
|
642
|
|
||
Other policyholder funds and benefits payable
|
764
|
|
767
|
|
||
Unearned premiums
|
6,820
|
|
5,282
|
|
||
Short-term debt
|
500
|
|
413
|
|
||
Long-term debt
|
4,346
|
|
4,265
|
|
||
Other liabilities
|
4,915
|
|
4,808
|
|
||
Total liabilities
|
54,178
|
|
49,206
|
|
||
Commitments and Contingencies Note (12)
|
|
|
||||
Stockholders’ Equity
|
|
|
||||
Preferred stock, $0.01 par value — 50,000,000 shares authorized, 13,800 shares issued at September 30, 2019 and December 31, 2018, aggregate liquidation preference of $345
|
334
|
|
334
|
|
||
Common stock, $0.01 par value — 1,500,000,000 shares authorized, 384,923,222 shares issued at September 30, 2019 and December 31, 2018
|
4
|
|
4
|
|
||
Additional paid-in capital
|
4,302
|
|
4,378
|
|
||
Retained earnings
|
12,251
|
|
11,055
|
|
||
Treasury stock, at cost — 23,940,696 and 25,772,238 shares
|
(1,027
|
)
|
(1,091
|
)
|
||
Accumulated other comprehensive income (loss), net of tax
|
214
|
|
(1,579
|
)
|
||
Total stockholders’ equity
|
16,078
|
|
13,101
|
|
||
Total liabilities and stockholders’ equity
|
$
|
70,256
|
|
$
|
62,307
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||
(in millions, except for share data)
|
2019
|
2018
|
|
2019
|
2018
|
||||||||
|
(Unaudited)
|
||||||||||||
Preferred Stock
|
$
|
334
|
|
$
|
—
|
|
|
$
|
334
|
|
$
|
—
|
|
Common Stock
|
4
|
|
4
|
|
|
4
|
|
4
|
|
||||
Additional Paid-in Capital
|
|
|
|
|
|
||||||||
Additional Paid-in Capital, beginning of period
|
4,300
|
|
4,374
|
|
|
4,378
|
|
4,379
|
|
||||
Issuance of shares under incentive and stock compensation plans
|
(17
|
)
|
(9
|
)
|
|
(91
|
)
|
(92
|
)
|
||||
Stock-based compensation plans expense
|
19
|
|
22
|
|
|
95
|
|
105
|
|
||||
Issuance of shares for warrant exercise
|
—
|
|
(2
|
)
|
|
(80
|
)
|
(7
|
)
|
||||
Additional Paid-in Capital, end of period
|
4,302
|
|
4,385
|
|
|
4,302
|
|
4,385
|
|
||||
Retained Earnings
|
|
|
|
|
|
||||||||
Retained Earnings, beginning of period
|
11,836
|
|
10,649
|
|
|
11,055
|
|
9,642
|
|
||||
Cumulative effect of accounting changes, net of tax
|
—
|
|
—
|
|
|
—
|
|
5
|
|
||||
Adjusted balance, beginning of period
|
11,836
|
|
10,649
|
|
|
11,055
|
|
9,647
|
|
||||
Net income
|
535
|
|
432
|
|
|
1,537
|
|
1,611
|
|
||||
Dividends declared on preferred stock
|
(11
|
)
|
—
|
|
|
(16
|
)
|
—
|
|
||||
Dividends declared on common stock
|
(109
|
)
|
(108
|
)
|
|
(325
|
)
|
(285
|
)
|
||||
Retained Earnings, end of period
|
12,251
|
|
10,973
|
|
|
12,251
|
|
10,973
|
|
||||
Treasury Stock, at cost
|
|
|
|
|
|
||||||||
Treasury Stock, at cost, beginning of period
|
(984
|
)
|
(1,128
|
)
|
|
(1,091
|
)
|
(1,194
|
)
|
||||
Treasury stock acquired
|
(63
|
)
|
—
|
|
|
(90
|
)
|
—
|
|
||||
Issuance of shares under incentive and stock compensation plans
|
27
|
|
14
|
|
|
112
|
|
109
|
|
||||
Net shares acquired related to employee incentive and stock compensation plans
|
(7
|
)
|
(2
|
)
|
|
(38
|
)
|
(36
|
)
|
||||
Issuance of shares for warrant exercise
|
—
|
|
2
|
|
|
80
|
|
7
|
|
||||
Treasury Stock, at cost, end of period
|
(1,027
|
)
|
(1,114
|
)
|
|
(1,027
|
)
|
(1,114
|
)
|
||||
Accumulated Other Comprehensive Income (Loss), net of tax
|
|
|
|
|
|
||||||||
Accumulated Other Comprehensive Income (Loss), net of tax, beginning of period
|
(198
|
)
|
(1,353
|
)
|
|
(1,579
|
)
|
663
|
|
||||
Cumulative effect of accounting changes, net of tax
|
—
|
|
—
|
|
|
—
|
|
(5
|
)
|
||||
Adjusted balance, beginning of period
|
(198
|
)
|
(1,353
|
)
|
|
(1,579
|
)
|
658
|
|
||||
Total other comprehensive income (loss)
|
412
|
|
(166
|
)
|
|
1,793
|
|
(2,177
|
)
|
||||
Accumulated Other Comprehensive Income (Loss), net of tax, end of period
|
214
|
|
(1,519
|
)
|
|
214
|
|
(1,519
|
)
|
||||
Total Stockholders’ Equity
|
$
|
16,078
|
|
$
|
12,729
|
|
|
$
|
16,078
|
|
$
|
12,729
|
|
Preferred Shares Outstanding
|
|
|
|
|
|
||||||||
Preferred Shares Outstanding, beginning of period
|
13,800
|
|
—
|
|
|
13,800
|
|
—
|
|
||||
Issuance of preferred shares
|
—
|
|
—
|
|
|
—
|
|
—
|
|
||||
Preferred Shares Outstanding, end of period
|
13,800
|
|
—
|
|
|
13,800
|
|
—
|
|
||||
Common Shares Outstanding
|
|
|
|
|
|
||||||||
Common Shares Outstanding, beginning of period (in thousands)
|
361,605
|
|
358,359
|
|
|
359,151
|
|
356,835
|
|
||||
Treasury stock acquired
|
(1,076
|
)
|
—
|
|
|
(1,581
|
)
|
—
|
|
||||
Issuance of shares under incentive and stock compensation plans
|
588
|
|
331
|
|
|
2,447
|
|
2,373
|
|
||||
Return of shares under incentive and stock compensation plans to treasury stock
|
(134
|
)
|
(57
|
)
|
|
(755
|
)
|
(694
|
)
|
||||
Issuance of shares for warrant exercise
|
—
|
|
43
|
|
|
1,721
|
|
162
|
|
||||
Common Shares Outstanding, at end of period
|
360,983
|
|
358,676
|
|
|
360,983
|
|
358,676
|
|
||||
Cash dividends declared per common share
|
$
|
0.30
|
|
$
|
0.30
|
|
|
$
|
0.90
|
|
$
|
0.80
|
|
Cash dividends declared per preferred share
|
$
|
750.00
|
|
$
|
—
|
|
|
$
|
1,125.00
|
|
$
|
—
|
|
|
Nine Months Ended September 30,
|
|||||
(in millions)
|
2019
|
2018
|
||||
Operating Activities
|
(Unaudited)
|
|||||
Net income
|
$
|
1,537
|
|
$
|
1,611
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
||||
Net realized capital gains
|
(332
|
)
|
(7
|
)
|
||
Amortization of deferred policy acquisition costs
|
1,184
|
|
1,092
|
|
||
Additions to deferred policy acquisition costs
|
(1,222
|
)
|
(1,057
|
)
|
||
Depreciation and amortization
|
333
|
|
359
|
|
||
Loss on extinguishment of debt
|
90
|
|
6
|
|
||
Gain on sale
|
—
|
|
(202
|
)
|
||
Other operating activities, net
|
75
|
|
346
|
|
||
Change in assets and liabilities:
|
|
|
||||
Decrease in reinsurance recoverables
|
115
|
|
111
|
|
||
Decrease (increase) in accrued and deferred income taxes
|
784
|
|
(74
|
)
|
||
Increase (decrease) in insurance liabilities
|
630
|
|
(119
|
)
|
||
Net change in other assets and other liabilities
|
(748
|
)
|
(224
|
)
|
||
Net cash provided by operating activities
|
2,446
|
|
1,842
|
|
||
Investing Activities
|
|
|
||||
Proceeds from the sale/maturity/prepayment of:
|
|
|
||||
Fixed maturities, available-for-sale
|
14,335
|
|
20,069
|
|
||
Fixed maturities, fair value option
|
7
|
|
21
|
|
||
Equity securities, at fair value
|
1,260
|
|
1,171
|
|
||
Mortgage loans
|
491
|
|
314
|
|
||
Partnerships
|
201
|
|
377
|
|
||
Payments for the purchase of:
|
|
|
||||
Fixed maturities, available-for-sale
|
(15,592
|
)
|
(18,679
|
)
|
||
Equity securities, at fair value
|
(847
|
)
|
(1,084
|
)
|
||
Mortgage loans
|
(515
|
)
|
(667
|
)
|
||
Partnerships
|
(218
|
)
|
(408
|
)
|
||
Net proceeds from (payments for) derivatives
|
60
|
|
(228
|
)
|
||
Net additions of property and equipment
|
(75
|
)
|
(70
|
)
|
||
Net proceeds from (payments for) short-term investments
|
1,480
|
|
(2,689
|
)
|
||
Other investing activities, net
|
(6
|
)
|
(4
|
)
|
||
Proceeds from business sold, net of cash transferred
|
—
|
|
1,115
|
|
||
Amount paid for business acquired, net of cash acquired
|
(1,901
|
)
|
—
|
|
||
Net cash used for investing activities
|
(1,320
|
)
|
(762
|
)
|
||
Financing Activities
|
|
|
||||
Deposits and other additions to investment and universal life-type contracts
|
107
|
|
1,814
|
|
||
Withdrawals and other deductions from investment and universal life-type contracts
|
(101
|
)
|
(9,210
|
)
|
||
Net transfers from separate accounts related to investment and universal life-type contracts
|
—
|
|
6,949
|
|
||
Repayments at maturity or settlement of consumer notes
|
—
|
|
(2
|
)
|
||
Net decrease in securities loaned or sold under agreements to repurchase
|
(291
|
)
|
(646
|
)
|
||
Repayment of debt
|
(1,583
|
)
|
(826
|
)
|
||
Proceeds from the issuance of debt
|
1,376
|
|
490
|
|
||
Net issuance (return) of shares under incentive and stock compensation plans
|
(18
|
)
|
10
|
|
||
Treasury stock acquired
|
(90
|
)
|
—
|
|
||
Dividends paid on preferred stock
|
(16
|
)
|
—
|
|
||
Dividends paid on common stock
|
(327
|
)
|
(270
|
)
|
||
Net cash used for financing activities
|
(943
|
)
|
(1,691
|
)
|
||
Foreign exchange rate effect on cash
|
(14
|
)
|
(4
|
)
|
||
Net increase (decrease) in cash, including cash classified as assets held for sale
|
169
|
|
(615
|
)
|
||
Less: Net increase (decrease) in cash classified as assets held for sale
|
—
|
|
(537
|
)
|
||
Net increase (decrease) in cash and restricted cash
|
169
|
|
(78
|
)
|
||
Cash and restricted cash – beginning of period
|
121
|
|
180
|
|
||
Cash and restricted cash– end of period
|
$
|
290
|
|
$
|
102
|
|
Supplemental Disclosure of Cash Flow Information
|
|
|
||||
Income tax received (paid)
|
$
|
420
|
|
$
|
(1
|
)
|
Interest paid
|
$
|
210
|
|
$
|
197
|
|
|
As of May 23, 2019
|
||
Assets
|
|
||
Cash and invested assets
|
$
|
3,848
|
|
Premiums receivable
|
492
|
|
|
Reinsurance recoverables
|
1,100
|
|
|
Prepaid reinsurance premiums
|
238
|
|
|
Other intangible assets
|
580
|
|
|
Property and equipment
|
83
|
|
|
Other assets
|
99
|
|
|
Total Assets Acquired
|
6,440
|
|
|
Liabilities
|
|
||
Unpaid losses and loss adjustment expenses
|
2,823
|
|
|
Unearned premiums
|
1,219
|
|
|
Long-term debt
|
284
|
|
|
Deferred income taxes, net
|
48
|
|
|
Other liabilities
|
568
|
|
|
Total Liabilities Assumed
|
4,942
|
|
|
Net identifiable assets acquired
|
1,498
|
|
|
Goodwill [1]
|
623
|
|
|
Net Assets Acquired
|
$
|
2,121
|
|
Asset
|
Amount
|
Weighted Average Expected Life
|
||
Value of in-force contracts - Property and Casualty ("P&C")
|
$
|
180
|
|
1
|
Distribution relationships
|
302
|
|
15
|
|
Trade name
|
17
|
|
10
|
|
Total finite life intangibles
|
499
|
|
10
|
|
Capacity of Lloyd's Syndicate
|
66
|
|
|
|
Licenses
|
15
|
|
|
|
Total indefinite life intangibles
|
81
|
|
|
|
Total other intangible assets
|
$
|
580
|
|
|
|
Value of In-force Contracts
|
Other Intangible Assets
|
||||
2019 (three months)
|
$
|
38
|
|
$
|
5
|
|
2020
|
$
|
47
|
|
$
|
22
|
|
2021
|
$
|
21
|
|
$
|
22
|
|
2022
|
$
|
9
|
|
$
|
22
|
|
2023
|
$
|
—
|
|
$
|
22
|
|
Computation of Basic and Diluted Earnings per Common Share
|
|||||||||||||
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||
(In millions, except for per share data)
|
2019
|
2018
|
|
2019
|
2018
|
||||||||
Earnings
|
|
|
|
|
|
||||||||
Income from continuing operations, net of tax
|
$
|
535
|
|
$
|
427
|
|
|
$
|
1,537
|
|
$
|
1,289
|
|
Less: Preferred stock dividends
|
11
|
|
—
|
|
|
16
|
|
—
|
|
||||
Income from continuing operations, net of tax, available to common stockholders
|
524
|
|
427
|
|
|
$
|
1,521
|
|
$
|
1,289
|
|
||
Income from discontinued operations, net of tax, available to common stockholders
|
—
|
|
5
|
|
|
—
|
|
322
|
|
||||
Net income available to common stockholders
|
$
|
524
|
|
$
|
432
|
|
|
$
|
1,521
|
|
$
|
1,611
|
|
Shares
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding, basic
|
361.4
|
|
358.6
|
|
|
361.0
|
|
358.1
|
|
||||
Dilutive effect of stock-based awards under compensation plans
|
4.0
|
|
3.6
|
|
|
3.4
|
|
4.0
|
|
||||
Dilutive effect of warrants [1]
|
—
|
|
1.9
|
|
|
0.7
|
|
2.0
|
|
||||
Weighted average common shares outstanding and dilutive potential common shares
|
365.4
|
|
364.1
|
|
|
365.1
|
|
364.1
|
|
||||
Earnings per common share
|
|
|
|
|
|
||||||||
Basic
|
|
|
|
|
|
||||||||
Income from continuing operations, net of tax, available to common stockholders
|
$
|
1.45
|
|
$
|
1.19
|
|
|
$
|
4.21
|
|
$
|
3.60
|
|
Income from discontinued operations, net of tax, available to common stockholders
|
—
|
|
0.01
|
|
|
—
|
|
0.90
|
|
||||
Net income available to common stockholders
|
$
|
1.45
|
|
$
|
1.20
|
|
|
$
|
4.21
|
|
$
|
4.50
|
|
Diluted
|
|
|
|
|
|
||||||||
Income from continuing operations, net of tax, available to common stockholders
|
$
|
1.43
|
|
$
|
1.17
|
|
|
$
|
4.17
|
|
$
|
3.54
|
|
Income from discontinued operations, net of tax, available to common stockholders
|
—
|
|
0.02
|
|
|
—
|
|
0.88
|
|
||||
Net income available to common stockholders
|
$
|
1.43
|
|
$
|
1.19
|
|
|
$
|
4.17
|
|
$
|
4.42
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||
|
2019
|
2018
|
|
2019
|
2018
|
||||||||
Commercial Lines
|
$
|
336
|
|
$
|
289
|
|
|
$
|
890
|
|
$
|
959
|
|
Personal Lines
|
94
|
|
51
|
|
|
252
|
|
146
|
|
||||
Property & Casualty Other Operations
|
18
|
|
9
|
|
|
52
|
|
31
|
|
||||
Group Benefits
|
146
|
|
77
|
|
|
377
|
|
227
|
|
||||
Hartford Funds
|
40
|
|
41
|
|
|
108
|
|
112
|
|
||||
Corporate
|
(99
|
)
|
(35
|
)
|
|
(142
|
)
|
136
|
|
||||
Net income
|
535
|
|
432
|
|
|
1,537
|
|
1,611
|
|
||||
Preferred stock dividends
|
11
|
|
—
|
|
|
16
|
|
—
|
|
||||
Net income available to common stockholders
|
$
|
524
|
|
$
|
432
|
|
|
$
|
1,521
|
|
$
|
1,611
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||
|
2019
|
2018
|
|
2019
|
2018
|
||||||||
Earned premiums and fee income:
|
|
|
|
|
|
||||||||
Commercial Lines
|
|
|
|
|
|
||||||||
Workers’ compensation
|
$
|
825
|
|
$
|
845
|
|
|
$
|
2,480
|
|
$
|
2,495
|
|
Liability
|
330
|
|
170
|
|
|
731
|
|
480
|
|
||||
Marine
|
59
|
|
—
|
|
|
86
|
|
—
|
|
||||
Package business
|
376
|
|
343
|
|
|
1,092
|
|
1,013
|
|
||||
Property
|
198
|
|
154
|
|
|
529
|
|
456
|
|
||||
Professional liability
|
137
|
|
65
|
|
|
304
|
|
190
|
|
||||
Bond
|
67
|
|
60
|
|
|
192
|
|
179
|
|
||||
Assumed reinsurance
|
75
|
|
—
|
|
|
104
|
|
—
|
|
||||
Automobile
|
191
|
|
157
|
|
|
522
|
|
454
|
|
||||
Total Commercial Lines
|
2,258
|
|
1,794
|
|
|
6,040
|
|
5,267
|
|
||||
Personal Lines
|
|
|
|
|
|
|
|
|
|
||||
Automobile
|
564
|
|
598
|
|
|
1,690
|
|
1,809
|
|
||||
Homeowners
|
248
|
|
261
|
|
|
741
|
|
785
|
|
||||
Total Personal Lines [1]
|
812
|
|
859
|
|
|
2,431
|
|
2,594
|
|
||||
Group Benefits
|
|
|
|
|
|
|
|
|
|
||||
Group disability
|
697
|
|
684
|
|
|
2,124
|
|
2,051
|
|
||||
Group life
|
621
|
|
652
|
|
|
1,902
|
|
1,968
|
|
||||
Other
|
64
|
|
60
|
|
|
187
|
|
179
|
|
||||
Total Group Benefits
|
1,382
|
|
1,396
|
|
|
4,213
|
|
4,198
|
|
||||
Hartford Funds
|
|
|
|
|
|
|
|
|
|
||||
Mutual fund and Exchange-Traded Products ("ETP")
|
231
|
|
242
|
|
|
674
|
|
710
|
|
||||
Talcott Resolution life and annuity separate accounts [2]
|
23
|
|
25
|
|
|
69
|
|
76
|
|
||||
Total Hartford Funds
|
254
|
|
267
|
|
|
743
|
|
786
|
|
||||
Corporate
|
18
|
|
15
|
|
|
43
|
|
21
|
|
||||
Total earned premiums and fee income
|
4,724
|
|
4,331
|
|
|
13,470
|
|
12,866
|
|
||||
Net investment income
|
490
|
|
444
|
|
|
1,448
|
|
1,323
|
|
||||
Net realized capital gains
|
89
|
|
38
|
|
|
332
|
|
60
|
|
||||
Other revenues
|
44
|
|
29
|
|
|
129
|
|
73
|
|
||||
Total revenues
|
$
|
5,347
|
|
$
|
4,842
|
|
|
$
|
15,379
|
|
$
|
14,322
|
|
[1]
|
For the three months ended September 30, 2019 and 2018, AARP members accounted for earned premiums of $729 and $758, respectively. For the nine months ended September 30, 2019 and 2018, AARP members accounted for earned premiums of $2.2 billion and $2.3 billion, respectively.
|
[2]
|
Represents revenues earned for investment advisory services on the life and annuity separate account AUM sold in May 2018 that is still managed by the Company's Hartford Funds segment.
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
||||||||||
|
Revenue Line Item
|
2019
|
2018
|
|
2019
|
2018
|
||||||||
Commercial Lines
|
|
|
|
|
|
|
|
|
||||||
Installment billing fees
|
Fee income
|
$
|
8
|
|
$
|
9
|
|
|
$
|
26
|
|
$
|
26
|
|
Personal Lines
|
|
|
|
|
|
|
|
|
|
|
||||
Installment billing fees
|
Fee income
|
9
|
|
10
|
|
|
28
|
|
30
|
|
||||
Insurance servicing revenues
|
Other revenues
|
23
|
|
24
|
|
|
65
|
|
66
|
|
||||
Group Benefits
|
|
|
|
|
|
|
|
|
|
|
||||
Administrative services
|
Fee income
|
45
|
|
43
|
|
|
135
|
|
131
|
|
||||
Hartford Funds
|
|
|
|
|
|
|
|
|
|
|
||||
Advisor, distribution and other management fees
|
Fee income
|
232
|
|
245
|
|
|
677
|
|
722
|
|
||||
Other fees
|
Fee income
|
22
|
|
21
|
|
|
65
|
|
63
|
|
||||
Corporate
|
|
|
|
|
|
|
|
|
|
|
||||
Investment management and other fees
|
Fee income
|
14
|
|
15
|
|
|
38
|
|
21
|
|
||||
Transition service revenues
|
Other revenues
|
6
|
|
6
|
|
|
18
|
|
8
|
|
||||
Total non-insurance revenues with customers
|
|
$
|
359
|
|
$
|
373
|
|
|
$
|
1,052
|
|
$
|
1,067
|
|
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 September 30, 2019
|
||||||||||||
|
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")
|
$
|
1,337
|
|
$
|
—
|
|
$
|
1,337
|
|
$
|
—
|
|
Collateralized loan obligations ("CLOs")
|
2,158
|
|
—
|
|
1,862
|
|
296
|
|
||||
Commercial mortgage-backed securities ("CMBS")
|
4,254
|
|
—
|
|
4,234
|
|
20
|
|
||||
Corporate
|
17,801
|
|
—
|
|
17,078
|
|
723
|
|
||||
Foreign government/government agencies
|
1,117
|
|
—
|
|
1,114
|
|
3
|
|
||||
Municipal
|
9,895
|
|
—
|
|
9,895
|
|
—
|
|
||||
Residential mortgage-backed securities ("RMBS")
|
4,732
|
|
—
|
|
4,118
|
|
614
|
|
||||
U.S. Treasuries
|
1,095
|
|
7
|
|
1,088
|
|
—
|
|
||||
Total fixed maturities
|
42,389
|
|
7
|
|
40,726
|
|
1,656
|
|
||||
Fixed maturities, FVO
|
39
|
|
—
|
|
39
|
|
—
|
|
||||
Equity securities, at fair value
|
1,414
|
|
1,196
|
|
148
|
|
70
|
|
||||
Derivative assets
|
|
|
|
|
||||||||
Credit derivatives
|
9
|
|
—
|
|
9
|
|
—
|
|
||||
Foreign exchange derivatives
|
4
|
|
—
|
|
4
|
|
—
|
|
||||
Interest rate derivatives
|
(1
|
)
|
—
|
|
(1
|
)
|
—
|
|
||||
Total derivative assets [1]
|
12
|
|
—
|
|
12
|
|
—
|
|
||||
Short-term investments
|
2,927
|
|
1,211
|
|
1,716
|
|
—
|
|
||||
Total assets accounted for at fair value on a recurring basis
|
$
|
46,781
|
|
$
|
2,414
|
|
$
|
42,641
|
|
$
|
1,726
|
|
Liabilities accounted for at fair value on a recurring basis
|
|
|
|
|
||||||||
Derivative liabilities
|
|
|
|
|
||||||||
Credit derivatives
|
(1
|
)
|
—
|
|
(1
|
)
|
—
|
|
||||
Equity derivatives
|
(5
|
)
|
—
|
|
—
|
|
(5
|
)
|
||||
Foreign exchange derivatives
|
4
|
|
—
|
|
4
|
|
—
|
|
||||
Interest rate derivatives
|
(69
|
)
|
—
|
|
(69
|
)
|
—
|
|
||||
Total derivative liabilities [2]
|
(71
|
)
|
—
|
|
(66
|
)
|
(5
|
)
|
||||
Contingent consideration [3]
|
(21
|
)
|
—
|
|
—
|
|
(21
|
)
|
||||
Total liabilities accounted for at fair value on a recurring basis
|
$
|
(92
|
)
|
$
|
—
|
|
$
|
(66
|
)
|
$
|
(26
|
)
|
Assets and (Liabilities) Carried at Fair Value by Hierarchy Level as of December 31, 2018
|
||||||||||||
|
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")
|
$
|
1,276
|
|
$
|
—
|
|
$
|
1,266
|
|
$
|
10
|
|
Collateralized loan obligations ("CLOs")
|
1,437
|
|
—
|
|
1,337
|
|
100
|
|
||||
Commercial mortgage-backed securities ("CMBS")
|
3,552
|
|
—
|
|
3,540
|
|
12
|
|
||||
Corporate
|
13,398
|
|
—
|
|
12,878
|
|
520
|
|
||||
Foreign government/government agencies
|
847
|
|
—
|
|
844
|
|
3
|
|
||||
Municipal
|
10,346
|
|
—
|
|
10,346
|
|
—
|
|
||||
Residential mortgage-backed securities ("RMBS")
|
3,279
|
|
—
|
|
2,359
|
|
920
|
|
||||
U.S. Treasuries
|
1,517
|
|
330
|
|
1,187
|
|
—
|
|
||||
Total fixed maturities
|
35,652
|
|
330
|
|
33,757
|
|
1,565
|
|
||||
Fixed maturities, FVO
|
22
|
|
—
|
|
22
|
|
—
|
|
||||
Equity securities, at fair value
|
1,214
|
|
1,093
|
|
44
|
|
77
|
|
||||
Derivative assets
|
|
|
|
|
||||||||
Credit derivatives
|
5
|
|
—
|
|
5
|
|
—
|
|
||||
Equity derivatives
|
3
|
|
—
|
|
—
|
|
3
|
|
||||
Foreign exchange derivatives
|
(2
|
)
|
—
|
|
(2
|
)
|
—
|
|
||||
Interest rate derivatives
|
1
|
|
—
|
|
1
|
|
—
|
|
||||
Total derivative assets [1]
|
7
|
|
—
|
|
4
|
|
3
|
|
||||
Short-term investments
|
4,283
|
|
1,039
|
|
3,244
|
|
—
|
|
||||
Total assets accounted for at fair value on a recurring basis
|
$
|
41,178
|
|
$
|
2,462
|
|
$
|
37,071
|
|
$
|
1,645
|
|
Liabilities accounted for at fair value on a recurring basis
|
|
|
|
|
||||||||
Derivative liabilities
|
|
|
|
|
||||||||
Credit derivatives
|
(2
|
)
|
—
|
|
(2
|
)
|
—
|
|
||||
Equity derivatives
|
1
|
|
—
|
|
1
|
|
—
|
|
||||
Foreign exchange derivatives
|
(5
|
)
|
—
|
|
(5
|
)
|
—
|
|
||||
Interest rate derivatives
|
(62
|
)
|
—
|
|
(63
|
)
|
1
|
|
||||
Total derivative liabilities [2]
|
(68
|
)
|
—
|
|
(69
|
)
|
1
|
|
||||
Contingent consideration [3]
|
(35
|
)
|
—
|
|
—
|
|
(35
|
)
|
||||
Total liabilities accounted for at fair value on a recurring basis
|
$
|
(103
|
)
|
$
|
—
|
|
$
|
(69
|
)
|
$
|
(34
|
)
|
[1]
|
Includes 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 and applicable law. See footnote 2 to this table for derivative liabilities.
|
[2]
|
Includes 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 and applicable law.
|
[3]
|
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
|
•
|
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 public security index and trade information, while the credit spread differential considers the non-public nature of the security. Securities priced using internal matrix pricing are classified as Level 2 because the inputs are observable or can be corroborated with observable data.
|
•
|
Independent broker quotes, which are typically non-binding, 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 Derivatives
|
|||
Level 2
Primary Observable Inputs
|
Level 3
Primary Unobservable Inputs
|
||
Fixed Maturity Investments
|
|||
Structured securities (includes ABS, CLOs, 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 from 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
|
|
• 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
|
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
|
|
Not applicable
|
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
|
|
Not applicable
|
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 September 30, 2019
|
|||||||||
CLOs [3]
|
$
|
225
|
|
Discounted cash flows
|
Spread
|
235 bps
|
244 bps
|
240 bps
|
Decrease
|
CMBS [3]
|
$
|
11
|
|
Discounted cash flows
|
Spread (encompasses prepayment, default risk and loss severity)
|
9 bps
|
1,832 bps
|
197 bps
|
Decrease
|
Corporate [4]
|
$
|
508
|
|
Discounted cash flows
|
Spread
|
126 bps
|
668 bps
|
223 bps
|
Decrease
|
RMBS [3]
|
$
|
614
|
|
Discounted cash flows
|
Spread [6]
|
15 bps
|
231 bps
|
73 bps
|
Decrease
|
|
|
|
Constant prepayment rate [6]
|
1%
|
11%
|
6%
|
Decrease [5]
|
||
|
|
|
Constant default rate [6]
|
1%
|
5%
|
3%
|
Decrease
|
||
|
|
|
Loss severity [6]
|
—%
|
100%
|
72%
|
Decrease
|
||
As of December 31, 2018
|
|||||||||
CMBS [3]
|
$
|
2
|
|
Discounted cash flows
|
Spread (encompasses prepayment, default risk and loss severity)
|
9 bps
|
1,040 bps
|
182 bps
|
Decrease
|
Corporate [4]
|
$
|
274
|
|
Discounted cash flows
|
Spread
|
145 bps
|
1,175 bps
|
263 bps
|
Decrease
|
RMBS [3]
|
$
|
815
|
|
Discounted cash flows
|
Spread [6]
|
12 bps
|
215 bps
|
86 bps
|
Decrease
|
|
|
|
Constant prepayment rate [6]
|
1%
|
15%
|
6%
|
Decrease [5]
|
||
|
|
|
Constant default rate [6]
|
1%
|
8%
|
3%
|
Decrease
|
||
|
|
|
Loss severity [6]
|
—%
|
100%
|
61%
|
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 bases 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.
|
[6]
|
Generally, a change in the assumption used for the constant default rate would have been accompanied by a directionally similar change in the assumption used for the loss severity and a directionally opposite change in the assumption used for constant prepayment rate and would have resulted in wider spreads.
|
[1]
|
The weighted average is determined based on the fair value of the derivatives.
|
[2]
|
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.
|
[3]
|
The swaptions presented are purchased options that have the right to enter into a pay-fixed swap.
|
Fair Value Rollforwards for Financial Instruments Classified as Level 3 for the Three Months Ended September 30, 2019
|
||||||||||||||||||||||||||||
|
Total realized/unrealized gains (losses)
|
|
|
|
|
|
|
|||||||||||||||||||||
|
|
Fair value as of June 30, 2019
|
Included in net income [1]
|
Included in OCI [2]
|
Purchases
|
Settlements
|
Sales
|
Transfers into Level 3 [3]
|
Transfers out of Level 3 [3]
|
Fair value as of September 30, 2019
|
||||||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Fixed Maturities, AFS
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
ABS
|
$
|
5
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(5
|
)
|
$
|
—
|
|
|
CLOs
|
286
|
|
—
|
|
—
|
|
92
|
|
(8
|
)
|
—
|
|
—
|
|
(74
|
)
|
296
|
|
|||||||||
|
CMBS
|
35
|
|
—
|
|
—
|
|
10
|
|
(1
|
)
|
—
|
|
—
|
|
(24
|
)
|
20
|
|
|||||||||
|
Corporate
|
568
|
|
(3
|
)
|
—
|
|
166
|
|
(7
|
)
|
(4
|
)
|
15
|
|
(12
|
)
|
723
|
|
|||||||||
|
Foreign Govt./Govt. Agencies
|
3
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
3
|
|
|||||||||
|
RMBS
|
758
|
|
—
|
|
(3
|
)
|
—
|
|
(51
|
)
|
—
|
|
—
|
|
(90
|
)
|
614
|
|
|||||||||
Total Fixed Maturities, AFS
|
1,655
|
|
(3
|
)
|
(3
|
)
|
268
|
|
(67
|
)
|
(4
|
)
|
15
|
|
(205
|
)
|
1,656
|
|
||||||||||
Equity Securities, at fair value
|
72
|
|
(2
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
70
|
|
||||||||||
Total Assets
|
$
|
1,727
|
|
$
|
(5
|
)
|
$
|
(3
|
)
|
$
|
268
|
|
$
|
(67
|
)
|
$
|
(4
|
)
|
$
|
15
|
|
$
|
(205
|
)
|
$
|
1,726
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Contingent Consideration
|
(21
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(21
|
)
|
||||||||||
Derivatives, net [4]
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Equity
|
(3
|
)
|
(2
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(5
|
)
|
|||||||||
Total Derivatives, net [4]
|
(3
|
)
|
(2
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(5
|
)
|
||||||||||
Total Liabilities
|
$
|
(24
|
)
|
$
|
(2
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(26
|
)
|
Fair Value Rollforwards for Financial Instruments Classified as Level 3 for the Nine Months Ended September 30, 2019
|
||||||||||||||||||||||||||||
|
Total realized/unrealized gains (losses)
|
|
|
|
|
|
|
|||||||||||||||||||||
|
|
Fair value as of January 1, 2019
|
Included in net income [1]
|
Included in OCI [2]
|
Purchases
|
Settlements
|
Sales
|
Transfers into Level 3 [3]
|
Transfers out of Level 3 [3]
|
Fair value as of September 30, 2019
|
||||||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Fixed Maturities, AFS
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
ABS
|
$
|
10
|
|
$
|
—
|
|
$
|
—
|
|
$
|
5
|
|
$
|
(1
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
(14
|
)
|
$
|
—
|
|
|
CLOs
|
100
|
|
—
|
|
—
|
|
329
|
|
(18
|
)
|
(6
|
)
|
—
|
|
(109
|
)
|
296
|
|
|||||||||
|
CMBS
|
12
|
|
—
|
|
1
|
|
34
|
|
(3
|
)
|
—
|
|
—
|
|
(24
|
)
|
20
|
|
|||||||||
|
Corporate
|
520
|
|
(4
|
)
|
9
|
|
261
|
|
(13
|
)
|
(68
|
)
|
61
|
|
(43
|
)
|
723
|
|
|||||||||
|
Foreign Govt./Govt. Agencies
|
3
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
3
|
|
|||||||||
|
RMBS
|
920
|
|
1
|
|
(5
|
)
|
134
|
|
(163
|
)
|
(35
|
)
|
—
|
|
(238
|
)
|
614
|
|
|||||||||
Total Fixed Maturities, AFS
|
1,565
|
|
(3
|
)
|
5
|
|
763
|
|
(198
|
)
|
(109
|
)
|
61
|
|
(428
|
)
|
1,656
|
|
||||||||||
Equity Securities, at fair value
|
77
|
|
(3
|
)
|
—
|
|
9
|
|
—
|
|
(13
|
)
|
—
|
|
—
|
|
70
|
|
||||||||||
Derivatives, net [4]
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Interest rate
|
1
|
|
(1
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||||||
Total Derivatives, net [4]
|
1
|
|
(1
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||||||||
Total Assets
|
$
|
1,643
|
|
$
|
(7
|
)
|
$
|
5
|
|
$
|
772
|
|
$
|
(198
|
)
|
$
|
(122
|
)
|
$
|
61
|
|
$
|
(428
|
)
|
$
|
1,726
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Contingent Consideration
|
(35
|
)
|
(6
|
)
|
—
|
|
—
|
|
20
|
|
—
|
|
—
|
|
—
|
|
(21
|
)
|
||||||||||
Derivatives, net [4]
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Equity
|
3
|
|
(8
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(5
|
)
|
|||||||||
Total Derivatives, net [4]
|
3
|
|
(8
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(5
|
)
|
||||||||||
Total Liabilities
|
$
|
(32
|
)
|
$
|
(14
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
20
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(26
|
)
|
Fair Value Rollforwards for Financial Instruments Classified as Level 3 for the Three Months Ended September 30, 2018
|
||||||||||||||||||||||||||||
|
Total realized/unrealized gains (losses)
|
|
|
|
|
|
|
|||||||||||||||||||||
|
|
Fair value as of June 30, 2018
|
Included in net income [1]
|
Included in OCI [2]
|
Purchases
|
Settlements
|
Sales
|
Transfers into Level 3 [3]
|
Transfers out of Level 3 [3]
|
Fair value as of September 30, 2018
|
||||||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Fixed Maturities, AFS
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
ABS
|
$
|
57
|
|
$
|
—
|
|
$
|
—
|
|
$
|
39
|
|
$
|
(2
|
)
|
$
|
—
|
|
$
|
9
|
|
$
|
(49
|
)
|
$
|
54
|
|
|
CLOs
|
159
|
|
—
|
|
—
|
|
211
|
|
—
|
|
—
|
|
—
|
|
(74
|
)
|
296
|
|
|||||||||
|
CMBS
|
28
|
|
(1
|
)
|
1
|
|
—
|
|
(1
|
)
|
—
|
|
—
|
|
(5
|
)
|
22
|
|
|||||||||
|
Corporate
|
559
|
|
—
|
|
(2
|
)
|
12
|
|
(2
|
)
|
(12
|
)
|
—
|
|
(4
|
)
|
551
|
|
|||||||||
|
Foreign Govt./Govt. Agencies
|
3
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
3
|
|
|||||||||
|
Municipal
|
9
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
9
|
|
|||||||||
|
RMBS
|
1,137
|
|
—
|
|
(3
|
)
|
—
|
|
(77
|
)
|
(26
|
)
|
—
|
|
(97
|
)
|
934
|
|
|||||||||
Total Fixed Maturities, AFS
|
1,952
|
|
(1
|
)
|
(4
|
)
|
262
|
|
(82
|
)
|
(38
|
)
|
9
|
|
(229
|
)
|
1,869
|
|
||||||||||
Equity Securities, at fair value
|
66
|
|
—
|
|
—
|
|
12
|
|
—
|
|
—
|
|
—
|
|
—
|
|
78
|
|
||||||||||
Derivatives, net [4]
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Equity
|
1
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1
|
|
|||||||||
|
Interest rate
|
2
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2
|
|
|||||||||
Total Derivatives, net [4]
|
3
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
3
|
|
||||||||||
Total Assets
|
$
|
2,021
|
|
$
|
(1
|
)
|
$
|
(4
|
)
|
$
|
274
|
|
$
|
(82
|
)
|
$
|
(38
|
)
|
$
|
9
|
|
$
|
(229
|
)
|
$
|
1,950
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Contingent Consideration
|
(31
|
)
|
(1
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(32
|
)
|
||||||||||
Total Liabilities
|
$
|
(31
|
)
|
$
|
(1
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(32
|
)
|
Fair Value Rollforwards for Financial Instruments Classified as Level 3 for the Nine Months Ended September 30, 2018
|
||||||||||||||||||||||||||||
|
Total realized/unrealized gains (losses)
|
|
|
|
|
|
|
|||||||||||||||||||||
|
|
Fair value as of January 1, 2018
|
Included in net income [1]
|
Included in OCI [2]
|
Purchases
|
Settlements
|
Sales
|
Transfers into Level 3 [3]
|
Transfers out of Level 3 [3]
|
Fair value as of September 30, 2018
|
||||||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Fixed Maturities, AFS
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
ABS
|
$
|
19
|
|
$
|
—
|
|
$
|
—
|
|
$
|
89
|
|
$
|
(5
|
)
|
$
|
—
|
|
$
|
12
|
|
$
|
(61
|
)
|
$
|
54
|
|
|
CLOs
|
95
|
|
—
|
|
—
|
|
309
|
|
—
|
|
(4
|
)
|
—
|
|
(104
|
)
|
296
|
|
|||||||||
|
CMBS
|
69
|
|
(1
|
)
|
—
|
|
25
|
|
(4
|
)
|
(8
|
)
|
—
|
|
(59
|
)
|
22
|
|
|||||||||
|
Corporate
|
520
|
|
1
|
|
(10
|
)
|
143
|
|
(34
|
)
|
(43
|
)
|
15
|
|
(41
|
)
|
551
|
|
|||||||||
|
Foreign Govt./Govt. Agencies
|
2
|
|
—
|
|
—
|
|
1
|
|
—
|
|
—
|
|
—
|
|
—
|
|
3
|
|
|||||||||
|
Municipal
|
17
|
|
—
|
|
(1
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
(7
|
)
|
9
|
|
|||||||||
|
RMBS
|
1,230
|
|
—
|
|
(10
|
)
|
170
|
|
(251
|
)
|
(27
|
)
|
—
|
|
(178
|
)
|
934
|
|
|||||||||
Total Fixed Maturities, AFS
|
1,952
|
|
—
|
|
(21
|
)
|
737
|
|
(294
|
)
|
(82
|
)
|
27
|
|
(450
|
)
|
1,869
|
|
||||||||||
Equity Securities, at fair value
|
76
|
|
28
|
|
1
|
|
13
|
|
—
|
|
(40
|
)
|
—
|
|
—
|
|
78
|
|
||||||||||
Derivatives, net [4]
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Equity
|
1
|
|
1
|
|
—
|
|
1
|
|
—
|
|
(2
|
)
|
—
|
|
—
|
|
1
|
|
|||||||||
|
Interest rate
|
1
|
|
1
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2
|
|
|||||||||
Total Derivatives, net [4]
|
2
|
|
2
|
|
—
|
|
1
|
|
—
|
|
(2
|
)
|
—
|
|
—
|
|
3
|
|
||||||||||
Total Assets
|
$
|
2,030
|
|
$
|
30
|
|
$
|
(20
|
)
|
$
|
751
|
|
$
|
(294
|
)
|
$
|
(124
|
)
|
$
|
27
|
|
$
|
(450
|
)
|
$
|
1,950
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Contingent Consideration
|
(29
|
)
|
(3
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(32
|
)
|
||||||||||
Total Liabilities
|
$
|
(29
|
)
|
$
|
(3
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(32
|
)
|
[1]
|
Amounts in these columns are generally reported in net realized capital gains (losses). All amounts are before income taxes.
|
[2]
|
All amounts are before income taxes.
|
[3]
|
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.
|
[4]
|
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.
|
|
Changes in Unrealized Gains (Losses) for Financial Instruments Classified as
Level 3 Still Held at End of Period
|
|||||||||||||||||||||||||
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
||||||||||||||||||||||
|
|
2019
|
2018
|
2019
|
2018
|
|
2019
|
2018
|
2019
|
2018
|
||||||||||||||||
|
|
Changes in Unrealized Gain/(Loss) included in Net Income [1] [2]
|
Changes in Unrealized Gain/(Loss) included in OCI [3]
|
|
Changes in Unrealized Gain/(Loss) included in Net Income [1] [2]
|
Changes in Unrealized Gain/(Loss) included in OCI [3]
|
||||||||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Fixed Maturities, AFS
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
CLOs
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1
|
|
$
|
—
|
|
|
CMBS
|
—
|
|
—
|
|
—
|
|
1
|
|
|
—
|
|
—
|
|
—
|
|
1
|
|
||||||||
|
Corporate
|
(2
|
)
|
—
|
|
—
|
|
(2
|
)
|
|
(3
|
)
|
—
|
|
8
|
|
(11
|
)
|
||||||||
|
Foreign Govt./Govt. Agencies
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
1
|
|
—
|
|
||||||||
|
RMBS
|
—
|
|
—
|
|
(3
|
)
|
(3
|
)
|
|
—
|
|
—
|
|
(4
|
)
|
(10
|
)
|
||||||||
Total Fixed Maturities, AFS
|
(2
|
)
|
—
|
|
(3
|
)
|
(4
|
)
|
|
(3
|
)
|
—
|
|
6
|
|
(20
|
)
|
|||||||||
Equity Securities, at fair value
|
(2
|
)
|
—
|
|
—
|
|
—
|
|
|
(2
|
)
|
—
|
|
—
|
|
—
|
|
|||||||||
Derivatives, net
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Equity
|
—
|
|
(1
|
)
|
—
|
|
—
|
|
|
—
|
|
(1
|
)
|
—
|
|
—
|
|
||||||||
|
Interest rate
|
—
|
|
—
|
|
—
|
|
—
|
|
|
(1
|
)
|
—
|
|
—
|
|
—
|
|
||||||||
Total Derivatives, net
|
—
|
|
(1
|
)
|
—
|
|
—
|
|
|
(1
|
)
|
(1
|
)
|
—
|
|
—
|
|
|||||||||
Total Assets
|
$
|
(4
|
)
|
$
|
(1
|
)
|
$
|
(3
|
)
|
$
|
(4
|
)
|
|
$
|
(6
|
)
|
$
|
(1
|
)
|
$
|
6
|
|
$
|
(20
|
)
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Contingent Consideration
|
—
|
|
(1
|
)
|
—
|
|
—
|
|
|
(6
|
)
|
(3
|
)
|
—
|
|
—
|
|
|||||||||
Derivatives, net
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Equity
|
(2
|
)
|
—
|
|
—
|
|
—
|
|
|
(8
|
)
|
—
|
|
—
|
|
—
|
|
||||||||
Total Derivatives, net
|
(2
|
)
|
—
|
|
—
|
|
—
|
|
|
(8
|
)
|
—
|
|
—
|
|
—
|
|
|||||||||
Total Liabilities
|
$
|
(2
|
)
|
$
|
(1
|
)
|
$
|
—
|
|
$
|
—
|
|
|
$
|
(14
|
)
|
$
|
(3
|
)
|
$
|
—
|
|
$
|
—
|
|
[1]
|
All amounts in these rows are reported in net realized capital gains (losses). All amounts are before income taxes.
|
[2]
|
Amounts presented are for Level 3 only and therefore may not agree to other disclosures included herein.
|
[3]
|
Changes in unrealized gain (loss) on fixed maturities, AFS are reported in changes in net unrealized gain on securities in the Condensed Consolidated Statements of Comprehensive Income. Changes in interest rate derivatives are reported in changes in net gain on cash flow hedging instruments in the Condensed Consolidated Statements of Comprehensive Income.
|
Financial Assets and Liabilities Not Carried at Fair Value
|
|||||||||||||||
|
September 30, 2019
|
|
December 31, 2018
|
||||||||||||
|
Fair Value Hierarchy Level
|
Carrying Amount
|
Fair Value
|
|
Fair Value Hierarchy Level
|
Carrying Amount
|
Fair Value
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Mortgage loans
|
Level 3
|
$
|
3,736
|
|
$
|
3,900
|
|
|
Level 3
|
$
|
3,704
|
|
$
|
3,746
|
|
Liabilities
|
|
|
|
|
|
|
|
||||||||
Other policyholder funds and benefits payable
|
Level 3
|
$
|
772
|
|
$
|
774
|
|
|
Level 3
|
$
|
774
|
|
$
|
775
|
|
Senior notes [1]
|
Level 2
|
$
|
3,757
|
|
$
|
4,416
|
|
|
Level 2
|
$
|
3,589
|
|
$
|
3,887
|
|
Junior subordinated debentures [1]
|
Level 2
|
$
|
1,089
|
|
$
|
1,122
|
|
|
Level 2
|
$
|
1,089
|
|
$
|
1,052
|
|
[1]
|
Included in long-term debt in the Condensed Consolidated Balance Sheets, except for current maturities, which are included in short-term debt.
|
Net Realized Capital Gains
|
|||||||||||||
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||
(Before tax)
|
2019
|
2018
|
|
2019
|
2018
|
||||||||
Gross gains on sales
|
$
|
77
|
|
$
|
26
|
|
|
$
|
190
|
|
$
|
91
|
|
Gross losses on sales
|
(4
|
)
|
(41
|
)
|
|
(44
|
)
|
(129
|
)
|
||||
Equity securities [1]
|
19
|
|
46
|
|
|
181
|
|
88
|
|
||||
Net OTTI losses recognized in earnings
|
(1
|
)
|
(1
|
)
|
|
(3
|
)
|
(1
|
)
|
||||
Valuation allowances on mortgage loans
|
—
|
|
—
|
|
|
1
|
|
—
|
|
||||
Transactional foreign currency revaluation
|
—
|
|
—
|
|
|
—
|
|
1
|
|
||||
Non-qualifying foreign currency derivatives
|
2
|
|
1
|
|
|
2
|
|
2
|
|
||||
Other, net [2]
|
(4
|
)
|
7
|
|
|
5
|
|
8
|
|
||||
Net realized capital gains
|
$
|
89
|
|
$
|
38
|
|
|
$
|
332
|
|
$
|
60
|
|
[1]
|
Includes all changes in fair value and trading gains and losses for equity securities. The net unrealized gain (loss) on equity securities included in net realized capital gains (losses) related to equity securities still held as of September 30, 2019, were $17 and $100 for the three and nine months ended September 30, 2019, respectively. The net unrealized gain (loss) on equity securities included in net realized capital gains (losses) related to equity securities still held as of September 30, 2018, were $41 and $50 for the three and nine months ended September 30, 2018, respectively.
|
[2]
|
Includes gains (losses) on non-qualifying derivatives, excluding foreign currency derivatives, of $(7) and $8, respectively, for the three months ended September 30, 2019 and 2018. For the nine months ended September 30, 2019 and 2018, the non-qualifying derivatives, excluding foreign currency derivatives, were $1 and $6 respectively.
|
Impairments in Earnings by Type
|
|||||||||||||
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||
|
2019
|
2018
|
|
2019
|
2018
|
||||||||
Credit impairments
|
$
|
1
|
|
$
|
1
|
|
|
$
|
3
|
|
$
|
1
|
|
Total impairments
|
$
|
1
|
|
$
|
1
|
|
|
$
|
3
|
|
$
|
1
|
|
Cumulative Credit Impairments
|
|||||||||||||
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||
(Before tax)
|
2019
|
2018
|
|
2019
|
2018
|
||||||||
Balance as of beginning of period
|
$
|
(18
|
)
|
$
|
(20
|
)
|
|
$
|
(19
|
)
|
$
|
(25
|
)
|
Additions for credit impairments recognized on [1]:
|
|
|
|
|
|
||||||||
Securities not previously impaired
|
(1
|
)
|
—
|
|
|
(3
|
)
|
—
|
|
||||
Securities previously impaired
|
—
|
|
(1
|
)
|
|
—
|
|
(1
|
)
|
||||
Reductions for credit impairments previously recognized on:
|
|
|
|
|
|
||||||||
Securities that matured or were sold during the period
|
—
|
|
1
|
|
|
3
|
|
6
|
|
||||
Balance as of end of period
|
$
|
(19
|
)
|
$
|
(20
|
)
|
|
$
|
(19
|
)
|
$
|
(20
|
)
|
[1]
|
These additions are included in the net OTTI losses recognized in earnings in the Condensed Consolidated Statements of Operations.
|
AFS Securities by Type
|
|||||||||||||||||||||||||||||||
|
September 30, 2019
|
|
December 31, 2018
|
||||||||||||||||||||||||||||
|
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
|
$
|
1,315
|
|
$
|
23
|
|
$
|
(1
|
)
|
$
|
1,337
|
|
$
|
—
|
|
|
$
|
1,272
|
|
$
|
5
|
|
$
|
(1
|
)
|
$
|
1,276
|
|
$
|
—
|
|
CLOs
|
2,162
|
|
4
|
|
(8
|
)
|
2,158
|
|
—
|
|
|
1,455
|
|
2
|
|
(20
|
)
|
1,437
|
|
—
|
|
||||||||||
CMBS
|
4,067
|
|
193
|
|
(6
|
)
|
4,254
|
|
(4
|
)
|
|
3,581
|
|
35
|
|
(64
|
)
|
3,552
|
|
(5
|
)
|
||||||||||
Corporate
|
16,867
|
|
970
|
|
(36
|
)
|
17,801
|
|
—
|
|
|
13,696
|
|
148
|
|
(446
|
)
|
13,398
|
|
—
|
|
||||||||||
Foreign govt./govt. agencies
|
1,053
|
|
65
|
|
(1
|
)
|
1,117
|
|
—
|
|
|
866
|
|
7
|
|
(26
|
)
|
847
|
|
—
|
|
||||||||||
Municipal
|
9,095
|
|
801
|
|
(1
|
)
|
9,895
|
|
—
|
|
|
9,972
|
|
421
|
|
(47
|
)
|
10,346
|
|
—
|
|
||||||||||
RMBS
|
4,626
|
|
107
|
|
(1
|
)
|
4,732
|
|
—
|
|
|
3,270
|
|
44
|
|
(35
|
)
|
3,279
|
|
—
|
|
||||||||||
U.S. Treasuries
|
989
|
|
106
|
|
—
|
|
1,095
|
|
—
|
|
|
1,491
|
|
41
|
|
(15
|
)
|
1,517
|
|
—
|
|
||||||||||
Total fixed maturities, AFS
|
$
|
40,174
|
|
$
|
2,269
|
|
$
|
(54
|
)
|
$
|
42,389
|
|
$
|
(4
|
)
|
|
$
|
35,603
|
|
$
|
703
|
|
$
|
(654
|
)
|
$
|
35,652
|
|
$
|
(5
|
)
|
[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 September 30, 2019 and December 31, 2018.
|
Fixed maturities, AFS, by Contractual Maturity Year
|
|||||||||||||
|
September 30, 2019
|
|
December 31, 2018
|
||||||||||
|
Amortized Cost
|
Fair Value
|
|
Amortized Cost
|
Fair Value
|
||||||||
One year or less
|
$
|
1,226
|
|
$
|
1,233
|
|
|
$
|
999
|
|
$
|
1,002
|
|
Over one year through five years
|
7,144
|
|
7,333
|
|
|
5,786
|
|
5,791
|
|
||||
Over five years through ten years
|
7,405
|
|
7,812
|
|
|
6,611
|
|
6,495
|
|
||||
Over ten years
|
12,229
|
|
13,530
|
|
|
12,629
|
|
12,820
|
|
||||
Subtotal
|
28,004
|
|
29,908
|
|
|
26,025
|
|
26,108
|
|
||||
Mortgage-backed and asset-backed securities
|
12,170
|
|
12,481
|
|
|
9,578
|
|
9,544
|
|
||||
Total fixed maturities, AFS
|
$
|
40,174
|
|
$
|
42,389
|
|
|
$
|
35,603
|
|
$
|
35,652
|
|
Unrealized Loss Aging for AFS Securities by Type and Length of Time as of September 30, 2019
|
|||||||||||||||||||||||||||||
|
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
|
$
|
144
|
|
$
|
143
|
|
$
|
(1
|
)
|
|
$
|
11
|
|
$
|
11
|
|
$
|
—
|
|
|
$
|
155
|
|
$
|
154
|
|
$
|
(1
|
)
|
CLOs
|
1,109
|
|
1,105
|
|
(4
|
)
|
|
429
|
|
425
|
|
(4
|
)
|
|
1,538
|
|
1,530
|
|
(8
|
)
|
|||||||||
CMBS
|
88
|
|
87
|
|
(1
|
)
|
|
31
|
|
26
|
|
(5
|
)
|
|
119
|
|
113
|
|
(6
|
)
|
|||||||||
Corporate
|
930
|
|
918
|
|
(12
|
)
|
|
497
|
|
473
|
|
(24
|
)
|
|
1,427
|
|
1,391
|
|
(36
|
)
|
|||||||||
Foreign govt./govt. agencies
|
58
|
|
58
|
|
—
|
|
|
39
|
|
38
|
|
(1
|
)
|
|
97
|
|
96
|
|
(1
|
)
|
|||||||||
Municipal
|
128
|
|
127
|
|
(1
|
)
|
|
—
|
|
—
|
|
—
|
|
|
128
|
|
127
|
|
(1
|
)
|
|||||||||
RMBS
|
166
|
|
165
|
|
(1
|
)
|
|
69
|
|
69
|
|
—
|
|
|
235
|
|
234
|
|
(1
|
)
|
|||||||||
U.S. Treasuries
|
37
|
|
37
|
|
—
|
|
|
119
|
|
119
|
|
—
|
|
|
156
|
|
156
|
|
—
|
|
|||||||||
Total fixed maturities, AFS in an unrealized loss position
|
$
|
2,660
|
|
$
|
2,640
|
|
$
|
(20
|
)
|
|
$
|
1,195
|
|
$
|
1,161
|
|
$
|
(34
|
)
|
|
$
|
3,855
|
|
$
|
3,801
|
|
$
|
(54
|
)
|
Unrealized Loss Aging for AFS Securities by Type and Length of Time as of December 31, 2018
|
|||||||||||||||||||||||||||||
|
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
|
$
|
566
|
|
$
|
566
|
|
$
|
—
|
|
|
$
|
113
|
|
$
|
112
|
|
$
|
(1
|
)
|
|
$
|
679
|
|
$
|
678
|
|
$
|
(1
|
)
|
CLOs
|
1,358
|
|
1,338
|
|
(20
|
)
|
|
7
|
|
7
|
|
—
|
|
|
1,365
|
|
1,345
|
|
(20
|
)
|
|||||||||
CMBS
|
896
|
|
882
|
|
(14
|
)
|
|
1,129
|
|
1,079
|
|
(50
|
)
|
|
2,025
|
|
1,961
|
|
(64
|
)
|
|||||||||
Corporate
|
7,174
|
|
6,903
|
|
(271
|
)
|
|
2,541
|
|
2,366
|
|
(175
|
)
|
|
9,715
|
|
9,269
|
|
(446
|
)
|
|||||||||
Foreign govt./govt. agencies
|
407
|
|
391
|
|
(16
|
)
|
|
203
|
|
193
|
|
(10
|
)
|
|
610
|
|
584
|
|
(26
|
)
|
|||||||||
Municipal
|
1,643
|
|
1,613
|
|
(30
|
)
|
|
292
|
|
275
|
|
(17
|
)
|
|
1,935
|
|
1,888
|
|
(47
|
)
|
|||||||||
RMBS
|
1,344
|
|
1,329
|
|
(15
|
)
|
|
648
|
|
628
|
|
(20
|
)
|
|
1,992
|
|
1,957
|
|
(35
|
)
|
|||||||||
U.S. Treasuries
|
497
|
|
492
|
|
(5
|
)
|
|
339
|
|
329
|
|
(10
|
)
|
|
836
|
|
821
|
|
(15
|
)
|
|||||||||
Total fixed maturities, AFS in an unrealized loss position
|
$
|
13,885
|
|
$
|
13,514
|
|
$
|
(371
|
)
|
|
$
|
5,272
|
|
$
|
4,989
|
|
$
|
(283
|
)
|
|
$
|
19,157
|
|
$
|
18,503
|
|
$
|
(654
|
)
|
Valuation Allowance Activity
|
||||||
|
2019
|
2018
|
||||
Balance, as of January 1
|
$
|
(1
|
)
|
$
|
(1
|
)
|
Reversals
|
1
|
|
—
|
|
||
Deductions
|
—
|
|
—
|
|
||
Balance, as of September 30
|
$
|
—
|
|
$
|
(1
|
)
|
Mortgage Loans Credit Quality
|
|||||||||
|
September 30, 2019
|
|
December 31, 2018
|
||||||
Loan-to-value
|
Carrying Value
|
Avg. Debt-Service Coverage Ratio
|
|
Carrying Value
|
Avg. Debt-Service Coverage Ratio
|
||||
65% - 80%
|
481
|
|
1.53x
|
|
386
|
|
1.60x
|
||
Less than 65%
|
3,255
|
|
2.52x
|
|
3,318
|
|
2.59x
|
||
Total mortgage loans
|
$
|
3,736
|
|
2.39x
|
|
$
|
3,704
|
|
2.49x
|
Mortgage Loans by Region
|
|||||||||||
|
September 30, 2019
|
|
December 31, 2018
|
||||||||
|
Carrying Value
|
Percent of Total
|
|
Carrying Value
|
Percent of Total
|
||||||
East North Central
|
$
|
274
|
|
7.3
|
%
|
|
$
|
250
|
|
6.8
|
%
|
Middle Atlantic
|
306
|
|
8.2
|
%
|
|
270
|
|
7.3
|
%
|
||
Mountain
|
63
|
|
1.7
|
%
|
|
30
|
|
0.8
|
%
|
||
New England
|
345
|
|
9.2
|
%
|
|
330
|
|
8.9
|
%
|
||
Pacific
|
835
|
|
22.4
|
%
|
|
917
|
|
24.8
|
%
|
||
South Atlantic
|
743
|
|
19.9
|
%
|
|
712
|
|
19.2
|
%
|
||
West North Central
|
121
|
|
3.2
|
%
|
|
148
|
|
4.0
|
%
|
||
West South Central
|
406
|
|
10.9
|
%
|
|
420
|
|
11.3
|
%
|
||
Other [1]
|
643
|
|
17.2
|
%
|
|
627
|
|
16.9
|
%
|
||
Total mortgage loans
|
$
|
3,736
|
|
100.0
|
%
|
|
$
|
3,704
|
|
100.0
|
%
|
[1]
|
Primarily represents loans collateralized by multiple properties in various regions.
|
Mortgage Loans by Property Type
|
|||||||||||
|
September 30, 2019
|
|
December 31, 2018
|
||||||||
|
Carrying Value
|
Percent of Total
|
|
Carrying
Value |
Percent of Total
|
||||||
Commercial
|
|
|
|
|
|
||||||
Industrial
|
$
|
1,156
|
|
30.9
|
%
|
|
$
|
1,108
|
|
29.9
|
%
|
Multifamily
|
1,156
|
|
30.9
|
%
|
|
1,138
|
|
30.7
|
%
|
||
Office
|
719
|
|
19.3
|
%
|
|
708
|
|
19.1
|
%
|
||
Retail
|
430
|
|
11.5
|
%
|
|
392
|
|
10.6
|
%
|
||
Single Family
|
135
|
|
3.6
|
%
|
|
82
|
|
2.2
|
%
|
||
Other
|
140
|
|
3.8
|
%
|
|
276
|
|
7.5
|
%
|
||
Total mortgage loans
|
$
|
3,736
|
|
100.0
|
%
|
|
$
|
3,704
|
|
100.0
|
%
|
Payables for Collateral on Investments
|
||||||
|
September 30, 2019
|
December 31, 2018
|
||||
|
Fair Value
|
Fair Value
|
|
|||
Securities Lending Transactions:
|
|
|
||||
Gross amount of securities on loan
|
$
|
603
|
|
$
|
820
|
|
Gross amount of associated liability for collateral received [1]
|
$
|
618
|
|
$
|
840
|
|
|
|
|
||||
Repurchase agreements:
|
|
|
||||
Gross amount of recognized liabilities for repurchase agreements
|
$
|
—
|
|
$
|
72
|
|
Gross amount of collateral pledged related to repurchase agreements [2]
|
$
|
—
|
|
$
|
73
|
|
Gross amount of recognized receivables for reverse repurchase agreements
|
$
|
52
|
|
$
|
64
|
|
[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 $0 and $3 which are excluded from the Company's Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018, respectively.
|
[2]
|
Collateral pledged is included within fixed maturities, AFS and short-term investments in the Company's Condensed Consolidated Balance Sheets.
|
Derivative Balance Sheet Presentation
|
||||||||||||||||||||||||
|
Net Derivatives
|
Asset
Derivatives
|
Liability Derivatives
|
|||||||||||||||||||||
|
Notional Amount
|
Fair Value
|
Fair Value
|
Fair Value
|
||||||||||||||||||||
Hedge Designation/ Derivative Type
|
Sep. 30, 2019
|
Dec. 31, 2018
|
Sep. 30, 2019
|
Dec. 31, 2018
|
Sep. 30, 2019
|
Dec. 31, 2018
|
Sep. 30, 2019
|
Dec. 31, 2018
|
||||||||||||||||
Cash flow hedges
|
|
|
|
|
|
|
|
|
||||||||||||||||
Interest rate swaps
|
$
|
2,040
|
|
$
|
2,040
|
|
$
|
—
|
|
$
|
1
|
|
$
|
—
|
|
$
|
2
|
|
$
|
—
|
|
$
|
(1
|
)
|
Foreign currency swaps
|
242
|
|
153
|
|
7
|
|
(6
|
)
|
9
|
|
2
|
|
(2
|
)
|
(8
|
)
|
||||||||
Total cash flow hedges
|
2,282
|
|
2,193
|
|
7
|
|
(5
|
)
|
9
|
|
4
|
|
(2
|
)
|
(9
|
)
|
||||||||
Non-qualifying strategies
|
|
|
|
|
|
|
|
|
||||||||||||||||
Interest rate contracts
|
|
|
|
|
|
|
|
|
||||||||||||||||
Interest rate swaps and futures
|
8,844
|
|
8,451
|
|
(70
|
)
|
(62
|
)
|
2
|
|
8
|
|
(72
|
)
|
(70
|
)
|
||||||||
Foreign exchange contracts
|
|
|
|
|
|
|
|
|
||||||||||||||||
Foreign currency swaps and forwards
|
454
|
|
287
|
|
1
|
|
(1
|
)
|
1
|
|
—
|
|
—
|
|
(1
|
)
|
||||||||
Credit contracts
|
|
|
|
|
|
|
|
|
||||||||||||||||
Credit derivatives that purchase credit protection
|
353
|
|
6
|
|
(2
|
)
|
—
|
|
—
|
|
—
|
|
(2
|
)
|
—
|
|
||||||||
Credit derivatives that assume credit risk [1]
|
521
|
|
1,102
|
|
10
|
|
3
|
|
10
|
|
8
|
|
—
|
|
(5
|
)
|
||||||||
Credit derivatives in offsetting positions
|
32
|
|
41
|
|
—
|
|
—
|
|
5
|
|
6
|
|
(5
|
)
|
(6
|
)
|
||||||||
Equity contracts
|
|
|
|
|
|
|
|
|
||||||||||||||||
Equity index swaps and options
|
715
|
|
211
|
|
(5
|
)
|
4
|
|
8
|
|
5
|
|
(13
|
)
|
(1
|
)
|
||||||||
Total non-qualifying strategies
|
10,919
|
|
10,098
|
|
(66
|
)
|
(56
|
)
|
26
|
|
27
|
|
(92
|
)
|
(83
|
)
|
||||||||
Total cash flow hedges and non-qualifying strategies
|
$
|
13,201
|
|
$
|
12,291
|
|
$
|
(59
|
)
|
$
|
(61
|
)
|
$
|
35
|
|
$
|
31
|
|
$
|
(94
|
)
|
$
|
(92
|
)
|
Balance Sheet Location
|
|
|
|
|
|
|
|
|
||||||||||||||||
Fixed maturities, available-for-sale
|
$
|
225
|
|
$
|
153
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
Other investments
|
1,305
|
|
9,864
|
|
12
|
|
7
|
|
15
|
|
23
|
|
(3
|
)
|
(16
|
)
|
||||||||
Other liabilities
|
11,671
|
|
2,274
|
|
(71
|
)
|
(68
|
)
|
20
|
|
8
|
|
(91
|
)
|
(76
|
)
|
||||||||
Total derivatives
|
$
|
13,201
|
|
$
|
12,291
|
|
$
|
(59
|
)
|
$
|
(61
|
)
|
$
|
35
|
|
$
|
31
|
|
$
|
(94
|
)
|
$
|
(92
|
)
|
[1]
|
The derivative instruments related to this strategy are held for other investment 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 September 30, 2019
|
|
|
|
|
|
|
||||||||||||
Other investments
|
$
|
35
|
|
$
|
32
|
|
$
|
12
|
|
$
|
(9
|
)
|
$
|
1
|
|
$
|
2
|
|
Other liabilities
|
$
|
(94
|
)
|
$
|
(12
|
)
|
$
|
(71
|
)
|
$
|
(11
|
)
|
$
|
(73
|
)
|
$
|
(9
|
)
|
As of December 31, 2018
|
|
|
|
|
|
|
||||||||||||
Other investments
|
$
|
31
|
|
$
|
26
|
|
$
|
7
|
|
$
|
(2
|
)
|
$
|
2
|
|
$
|
3
|
|
Other liabilities
|
$
|
(92
|
)
|
$
|
(20
|
)
|
$
|
(68
|
)
|
$
|
(4
|
)
|
$
|
(65
|
)
|
$
|
(7
|
)
|
[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.
|
Gain (Loss) Recognized in OCI
|
|||||||||||||
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||
|
2019
|
2018
|
|
2019
|
2018
|
||||||||
Interest rate swaps
|
$
|
—
|
|
$
|
—
|
|
|
$
|
20
|
|
$
|
(16
|
)
|
Foreign currency swaps
|
10
|
|
—
|
|
|
14
|
|
1
|
|
||||
Total
|
$
|
10
|
|
$
|
—
|
|
|
$
|
34
|
|
$
|
(15
|
)
|
Gain (Loss) Reclassified from AOCI into Income
|
|
||||||||||||||||||||||||||||||||||||||
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||||||||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||||||||||||||||||||||||||
|
Net Realized Capital Gain/(Loss)
|
Net Investment Income
|
Interest Expense
|
|
Net Realized Capital Gain/(Loss)
|
Net Investment Income
|
Interest Expense
|
|
Net Realized Capital Gain/(Loss)
|
Net Investment Income
|
Interest Expense
|
|
Net Realized Capital Gain/(Loss)
|
Net Investment Income
|
Interest Expense
|
||||||||||||||||||||||||
Interest rate swaps
|
$
|
—
|
|
$
|
1
|
|
$
|
—
|
|
|
$
|
—
|
|
$
|
7
|
|
$
|
—
|
|
|
$
|
2
|
|
$
|
1
|
|
$
|
1
|
|
|
$
|
1
|
|
$
|
24
|
|
$
|
—
|
|
Foreign currency swaps
|
—
|
|
1
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
2
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
||||||||||||
Total
|
$
|
—
|
|
$
|
2
|
|
$
|
—
|
|
|
$
|
—
|
|
$
|
7
|
|
$
|
—
|
|
|
$
|
2
|
|
$
|
3
|
|
$
|
1
|
|
|
$
|
1
|
|
$
|
24
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Total amounts presented on the Condensed Consolidated Statement of Operations
|
$
|
89
|
|
$
|
490
|
|
$
|
67
|
|
|
$
|
38
|
|
$
|
444
|
|
$
|
69
|
|
|
$
|
332
|
|
$
|
1,448
|
|
$
|
194
|
|
|
$
|
60
|
|
$
|
1,323
|
|
$
|
228
|
|
[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 of Notes to Condensed Consolidated Financial Statements.
|
Credit Risk Assumed 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 September 30, 2019
|
|||||||||||||||
Single name credit default swaps
|
|
|
|
|
|
|
|
||||||||
Investment grade risk exposure
|
$
|
121
|
|
$
|
2
|
|
5 years
|
Corporate Credit
|
A-
|
$
|
—
|
|
$
|
—
|
|
Basket credit default swaps [4]
|
|
|
|
|
|
|
|
||||||||
Investment grade risk exposure
|
400
|
|
8
|
|
5 years
|
Corporate Credit
|
BBB+
|
—
|
|
—
|
|
||||
Investment grade risk exposure
|
1
|
|
—
|
|
Less than 1 year
|
CMBS Credit
|
A-
|
1
|
|
—
|
|
||||
Below investment grade risk exposure
|
15
|
|
(5
|
)
|
Less than 1 year
|
CMBS Credit
|
CCC-
|
15
|
|
5
|
|
||||
Total [5]
|
$
|
537
|
|
$
|
5
|
|
|
|
|
$
|
16
|
|
$
|
5
|
|
As of December 31, 2018
|
|||||||||||||||
Single name credit default swaps
|
|
|
|
|
|
|
|
||||||||
Investment grade risk exposure
|
$
|
169
|
|
$
|
2
|
|
4 years
|
Corporate Credit/
Foreign Gov. |
A
|
$
|
—
|
|
$
|
—
|
|
Basket credit default swaps [4]
|
|
|
|
|
|
|
|
||||||||
Investment grade risk exposure
|
799
|
|
(1
|
)
|
6 years
|
Corporate Credit
|
BBB+
|
—
|
|
—
|
|
||||
Below investment grade risk exposure
|
125
|
|
2
|
|
5 years
|
Corporate Credit
|
B+
|
—
|
|
—
|
|
||||
Investment grade risk exposure
|
11
|
|
—
|
|
5 years
|
CMBS Credit
|
A-
|
2
|
|
—
|
|
||||
Below investment grade risk exposure
|
19
|
|
(6
|
)
|
Less than 1 year
|
CMBS Credit
|
CCC
|
19
|
|
6
|
|
||||
Total [5]
|
$
|
1,123
|
|
$
|
(3
|
)
|
|
|
|
$
|
21
|
|
$
|
6
|
|
[1]
|
The average credit ratings are based on availability and are generally the midpoint of the available ratings among Moody’s, S&P and Fitch. 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 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]
|
Comprised of 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 of Notes to Condensed Consolidated Financial Statements.
|
|
For the nine months ended September 30,
|
|||||
|
2019
|
2018
|
||||
Beginning liabilities for unpaid losses and loss adjustment expenses, gross
|
$
|
24,584
|
|
$
|
23,775
|
|
Reinsurance and other recoverables
|
4,232
|
|
3,957
|
|
||
Beginning liabilities for unpaid losses and loss adjustment expenses, net
|
20,352
|
|
19,818
|
|
||
Navigators Group acquisition
|
2,001
|
|
—
|
|
||
Provision for unpaid losses and loss adjustment expenses
|
|
|
|
|
||
Current accident year
|
5,448
|
|
5,151
|
|
||
Prior accident year development
|
(23
|
)
|
(139
|
)
|
||
Total provision for unpaid losses and loss adjustment expenses
|
5,425
|
|
5,012
|
|
||
Payments
|
|
|
|
|
||
Current accident year
|
(1,549
|
)
|
(1,647
|
)
|
||
Prior accident years
|
(3,403
|
)
|
(3,166
|
)
|
||
Total payments
|
(4,952
|
)
|
(4,813
|
)
|
||
Foreign currency adjustment
|
(12
|
)
|
—
|
|
||
Ending liabilities for unpaid losses and loss adjustment expenses, net
|
22,814
|
|
20,017
|
|
||
Reinsurance and other recoverables
|
5,083
|
|
3,780
|
|
||
Ending liabilities for unpaid losses and loss adjustment expenses, gross
|
$
|
27,897
|
|
$
|
23,797
|
|
|
For the nine months ended September 30,
|
|||||
|
2019
|
2018
|
||||
Workers’ compensation
|
$
|
(90
|
)
|
$
|
(97
|
)
|
Workers’ compensation discount accretion
|
25
|
|
30
|
|
||
General liability
|
62
|
|
32
|
|
||
Marine
|
8
|
|
—
|
|
||
Package business
|
(32
|
)
|
(16
|
)
|
||
Commercial property
|
(16
|
)
|
(10
|
)
|
||
Professional liability
|
32
|
|
(12
|
)
|
||
Bond
|
(2
|
)
|
—
|
|
||
Assumed Reinsurance
|
3
|
|
—
|
|
||
Automobile liability - Commercial Lines
|
27
|
|
(15
|
)
|
||
Automobile liability - Personal Lines
|
(28
|
)
|
(10
|
)
|
||
Homeowners
|
—
|
|
(20
|
)
|
||
Net asbestos reserves
|
—
|
|
—
|
|
||
Net environmental reserves
|
—
|
|
—
|
|
||
Catastrophes
|
(27
|
)
|
(47
|
)
|
||
Uncollectible reinsurance
|
—
|
|
22
|
|
||
Other reserve re-estimates, net
|
15
|
|
4
|
|
||
Total prior accident year development [1]
|
$
|
(23
|
)
|
$
|
(139
|
)
|
|
For the nine months ended September 30,
|
|||||
|
2019
|
2018
|
||||
Beginning liabilities for unpaid losses and loss adjustment expenses, gross
|
$
|
8,445
|
|
$
|
8,512
|
|
Reinsurance recoverables
|
239
|
|
209
|
|
||
Beginning liabilities for unpaid losses and loss adjustment expenses, net
|
8,206
|
|
8,303
|
|
||
Aetna U.S. group life and disability business acquisition
|
—
|
|
42
|
|
||
Provision for unpaid losses and loss adjustment expenses
|
|
|
|
|
||
Current incurral year
|
3,351
|
|
3,423
|
|
||
Prior year's discount accretion
|
169
|
|
175
|
|
||
Prior incurral year development [1]
|
(321
|
)
|
(284
|
)
|
||
Total provision for unpaid losses and loss adjustment expenses [2]
|
3,199
|
|
3,314
|
|
||
Payments
|
|
|
|
|
||
Current incurral year
|
(1,603
|
)
|
(1,659
|
)
|
||
Prior incurral years
|
(1,743
|
)
|
(1,741
|
)
|
||
Total payments
|
(3,346
|
)
|
(3,400
|
)
|
||
Ending liabilities for unpaid losses and loss adjustment expenses, net
|
8,059
|
|
8,259
|
|
||
Reinsurance recoverables
|
231
|
|
241
|
|
||
Ending liabilities for unpaid losses and loss adjustment expenses, gross
|
$
|
8,290
|
|
$
|
8,500
|
|
[1]
|
Prior incurral year development represents the change in estimated ultimate incurred losses and loss adjustment expenses for prior incurral years on a discounted basis.
|
[2]
|
Includes unallocated loss adjustment expenses of $130 and $131 for the nine months ended September 30, 2019 and 2018, 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[1]
|
|||
Liability balance, as of January 1, 2019
|
$
|
642
|
|
Incurred
|
63
|
|
|
Paid
|
(77
|
)
|
|
Change in unrealized investment gains and losses
|
17
|
|
|
Liability balance, as of September 30, 2019
|
$
|
645
|
|
Reinsurance recoverable asset, as of January 1, 2019
|
$
|
27
|
|
Incurred
|
2
|
|
|
Paid
|
—
|
|
|
Reinsurance recoverable asset, as of September 30, 2019
|
$
|
29
|
|
Liability balance, as of January 1, 2018
|
$
|
713
|
|
Incurred
|
10
|
|
|
Paid
|
(25
|
)
|
|
Change in unrealized investment gains and losses
|
(42
|
)
|
|
Liability balance, as of September 30, 2018
|
$
|
656
|
|
Reinsurance recoverable asset, as of January 1, 2018
|
$
|
26
|
|
Incurred
|
10
|
|
|
Paid
|
(1
|
)
|
|
Reinsurance recoverable asset, as of September 30, 2018
|
$
|
35
|
|
Income Tax Rate Reconciliation
|
|||||||||||||
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||
|
2019
|
2018
|
|
2019
|
2018
|
||||||||
Tax provision at U.S. federal statutory rate
|
$
|
138
|
|
$
|
112
|
|
|
$
|
396
|
|
$
|
333
|
|
Tax-exempt interest
|
(14
|
)
|
(16
|
)
|
|
(43
|
)
|
(50
|
)
|
||||
Dividends received deduction ("DRD")
|
(3
|
)
|
—
|
|
|
(5
|
)
|
—
|
|
||||
Executive compensation
|
—
|
|
1
|
|
|
5
|
|
8
|
|
||||
Stock-based compensation
|
(3
|
)
|
(3
|
)
|
|
(7
|
)
|
(5
|
)
|
||||
Tax Reform
|
—
|
|
11
|
|
|
—
|
|
13
|
|
||||
Other
|
—
|
|
(2
|
)
|
|
1
|
|
(2
|
)
|
||||
Provision for income taxes
|
$
|
118
|
|
$
|
103
|
|
|
$
|
347
|
|
$
|
297
|
|
Rollforward of Unrecognized Tax Benefits
|
|||||||||||||
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||
|
2019
|
2018
|
|
2019
|
2018
|
||||||||
Balance, beginning of period
|
$
|
14
|
|
$
|
9
|
|
|
$
|
14
|
|
$
|
9
|
|
Gross increases - tax positions in prior period
|
—
|
|
5
|
|
|
—
|
|
5
|
|
||||
Gross decreases - tax positions in prior period
|
—
|
|
—
|
|
|
—
|
|
—
|
|
||||
Balance, end of period
|
$
|
14
|
|
$
|
14
|
|
|
$
|
14
|
|
$
|
14
|
|
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)
|
|
|
|
|
|||||||
June 30, 2019
|
0.5
|
|
$
|
27
|
|
$
|
53.84
|
|
$
|
973
|
|
September 30, 2019
|
1.1
|
|
$
|
63
|
|
$
|
58.50
|
|
$
|
910
|
|
Total
|
1.6
|
|
$
|
90
|
|
|
|
Changes in AOCI, Net of Tax for the Three Months Ended September 30, 2019
|
||||||||||||||||||
|
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
|
$
|
1,367
|
|
$
|
(3
|
)
|
$
|
11
|
|
$
|
34
|
|
$
|
(1,607
|
)
|
$
|
(198
|
)
|
OCI before reclassifications
|
458
|
|
—
|
|
8
|
|
(4
|
)
|
1
|
|
463
|
|
||||||
Amounts reclassified from AOCI
|
(57
|
)
|
—
|
|
(2
|
)
|
—
|
|
8
|
|
(51
|
)
|
||||||
OCI, net of tax
|
401
|
|
—
|
|
6
|
|
(4
|
)
|
9
|
|
412
|
|
||||||
Ending balance
|
$
|
1,768
|
|
$
|
(3
|
)
|
$
|
17
|
|
$
|
30
|
|
$
|
(1,598
|
)
|
$
|
214
|
|
Changes in AOCI, Net of Tax for the Nine Months Ended September 30, 2019
|
||||||||||||||||||
|
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
|
$
|
24
|
|
$
|
(4
|
)
|
$
|
(5
|
)
|
$
|
30
|
|
$
|
(1,624
|
)
|
$
|
(1,579
|
)
|
OCI before reclassifications
|
1,857
|
|
1
|
|
27
|
|
—
|
|
1
|
|
1,886
|
|
||||||
Amounts reclassified from AOCI
|
(113
|
)
|
—
|
|
(5
|
)
|
—
|
|
25
|
|
(93
|
)
|
||||||
OCI, net of tax
|
1,744
|
|
1
|
|
22
|
|
—
|
|
26
|
|
1,793
|
|
||||||
Ending balance
|
$
|
1,768
|
|
$
|
(3
|
)
|
$
|
17
|
|
$
|
30
|
|
$
|
(1,598
|
)
|
$
|
214
|
|
Reclassifications from AOCI
|
|||||||
|
Three Months Ended September 30, 2019
|
Nine Months Ended September 30, 2019
|
Affected Line Item in the Condensed Consolidated Statement of Operations
|
||||
Net Unrealized Gain on Securities
|
|
|
|
||||
Available-for-sale securities
|
$
|
72
|
|
$
|
143
|
|
Net realized capital gains
|
|
72
|
|
143
|
|
Total before tax
|
||
|
15
|
|
30
|
|
Income tax expense
|
||
|
$
|
57
|
|
$
|
113
|
|
Net income
|
Net Gains on Cash Flow Hedging Instruments
|
|
|
|
||||
Interest rate swaps
|
$
|
—
|
|
$
|
2
|
|
Net realized capital gains
|
Interest rate swaps
|
1
|
|
1
|
|
Net investment income
|
||
Interest rate swaps
|
—
|
|
1
|
|
Interest expense
|
||
Foreign currency swaps
|
1
|
|
2
|
|
Net investment income
|
||
|
2
|
|
6
|
|
Total before tax
|
||
|
—
|
|
1
|
|
Income tax expense
|
||
|
$
|
2
|
|
$
|
5
|
|
Net income
|
Pension and Other Postretirement Plan Adjustments
|
|
|
|
||||
Amortization of prior service credit
|
$
|
2
|
|
$
|
5
|
|
Insurance operating costs and other expenses
|
Amortization of actuarial loss
|
(12
|
)
|
(37
|
)
|
Insurance operating costs and other expenses
|
||
|
(10
|
)
|
(32
|
)
|
Total before tax
|
||
|
(2
|
)
|
(7
|
)
|
Income tax expense
|
||
|
$
|
(8
|
)
|
$
|
(25
|
)
|
Net income
|
Total amounts reclassified from AOCI
|
$
|
51
|
|
$
|
93
|
|
Net income
|
Changes in AOCI, Net of Tax for the Three Months Ended September 30, 2018
|
||||||||||||||||||
|
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
|
$
|
211
|
|
$
|
(3
|
)
|
$
|
(12
|
)
|
$
|
33
|
|
$
|
(1,582
|
)
|
$
|
(1,353
|
)
|
OCI before reclassifications
|
(183
|
)
|
(1
|
)
|
1
|
|
1
|
|
1
|
|
(181
|
)
|
||||||
Amounts reclassified from AOCI
|
12
|
|
—
|
|
(6
|
)
|
—
|
|
9
|
|
15
|
|
||||||
OCI, net of tax
|
(171
|
)
|
(1
|
)
|
(5
|
)
|
1
|
|
10
|
|
(166
|
)
|
||||||
Ending balance
|
$
|
40
|
|
$
|
(4
|
)
|
$
|
(17
|
)
|
$
|
34
|
|
$
|
(1,572
|
)
|
$
|
(1,519
|
)
|
Changes in AOCI, Net of Tax for the Nine Months Ended September 30, 2018
|
||||||||||||||||||
|
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
|
$
|
1,931
|
|
$
|
(3
|
)
|
$
|
18
|
|
$
|
34
|
|
$
|
(1,317
|
)
|
$
|
663
|
|
Cumulative effect of accounting changes, net of tax [1]
|
273
|
|
—
|
|
2
|
|
4
|
|
(284
|
)
|
(5
|
)
|
||||||
Adjusted balance, beginning of period
|
2,204
|
|
(3
|
)
|
20
|
|
38
|
|
(1,601
|
)
|
658
|
|
||||||
OCI before reclassifications [2]
|
(2,213
|
)
|
—
|
|
(12
|
)
|
(4
|
)
|
—
|
|
(2,229
|
)
|
||||||
Amounts reclassified from AOCI
|
49
|
|
(1
|
)
|
(25
|
)
|
—
|
|
29
|
|
52
|
|
||||||
OCI, net of tax
|
(2,164
|
)
|
(1
|
)
|
(37
|
)
|
(4
|
)
|
29
|
|
(2,177
|
)
|
||||||
Ending balance
|
$
|
40
|
|
$
|
(4
|
)
|
$
|
(17
|
)
|
$
|
34
|
|
$
|
(1,572
|
)
|
$
|
(1,519
|
)
|
Reclassifications from AOCI
|
|||||||
|
Three Months Ended September 30, 2018
|
Nine Months Ended September 30, 2018
|
Affected Line Item in the Condensed Consolidated Statement of Operations
|
||||
Net Unrealized Loss on Securities
|
|
|
|
||||
Available-for-sale securities
|
$
|
(15
|
)
|
$
|
(59
|
)
|
Net realized capital gains
|
|
(15
|
)
|
(59
|
)
|
Total before tax
|
||
|
(3
|
)
|
(12
|
)
|
Income tax expense
|
||
|
—
|
|
(2
|
)
|
Income from discontinued operations, net of tax
|
||
|
$
|
(12
|
)
|
$
|
(49
|
)
|
Net income
|
OTTI Losses in OCI
|
|
|
|
||||
Other than temporary impairments
|
$
|
—
|
|
$
|
—
|
|
Net realized capital gains
|
|
—
|
|
—
|
|
Income before taxes
|
||
|
—
|
|
—
|
|
Income tax expense (benefit)
|
||
|
$
|
—
|
|
$
|
1
|
|
Income from discontinued operations, net of tax
|
|
$
|
—
|
|
$
|
1
|
|
Net Income (loss)
|
Net Gains on Cash Flow Hedging Instruments
|
|
|
|
||||
Interest rate swaps
|
$
|
—
|
|
$
|
1
|
|
Net realized capital gains
|
Interest rate swaps
|
7
|
|
24
|
|
Net investment income
|
||
|
7
|
|
25
|
|
Total before tax
|
||
|
1
|
|
5
|
|
Income tax expense (benefit)
|
||
|
—
|
|
5
|
|
Income from discontinued operations, net of tax
|
||
|
$
|
6
|
|
$
|
25
|
|
Net income
|
Pension and Other Postretirement Plan Adjustments
|
|
|
|
||||
Amortization of prior service credit
|
$
|
2
|
|
$
|
5
|
|
Insurance operating costs and other expenses
|
Amortization of actuarial loss
|
(14
|
)
|
(42
|
)
|
Insurance operating costs and other expenses
|
||
|
(12
|
)
|
(37
|
)
|
Total before tax
|
||
|
(3
|
)
|
(8
|
)
|
Income tax expense
|
||
|
$
|
(9
|
)
|
$
|
(29
|
)
|
Net income
|
Total amounts reclassified from AOCI
|
$
|
(15
|
)
|
$
|
(52
|
)
|
Net income
|
Net Periodic Cost (Benefit)
|
|||||||||||||||||||||||||
|
Pension Benefits
|
|
Other Postretirement Benefits
|
||||||||||||||||||||||
|
Three Months Ended September 30,
|
Nine months ended September 30,
|
|
Three Months Ended September 30,
|
Nine months ended September 30,
|
||||||||||||||||||||
|
2019
|
2018
|
2019
|
2018
|
|
2019
|
2018
|
2019
|
2018
|
||||||||||||||||
Service cost
|
$
|
1
|
|
$
|
1
|
|
$
|
3
|
|
$
|
3
|
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
Interest cost
|
40
|
|
36
|
|
119
|
|
107
|
|
|
2
|
|
1
|
|
6
|
|
4
|
|
||||||||
Expected return on plan assets
|
(57
|
)
|
(57
|
)
|
(170
|
)
|
(172
|
)
|
|
(1
|
)
|
(2
|
)
|
(3
|
)
|
(5
|
)
|
||||||||
Amortization of prior service credit
|
—
|
|
—
|
|
—
|
|
—
|
|
|
(2
|
)
|
(2
|
)
|
(5
|
)
|
(5
|
)
|
||||||||
Amortization of actuarial loss
|
11
|
|
12
|
|
33
|
|
37
|
|
|
1
|
|
2
|
|
4
|
|
5
|
|
||||||||
Net periodic cost (benefit)
|
$
|
(5
|
)
|
$
|
(8
|
)
|
$
|
(15
|
)
|
$
|
(25
|
)
|
|
$
|
—
|
|
$
|
(1
|
)
|
$
|
2
|
|
$
|
(1
|
)
|
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
||||
|
2019
|
2019
|
||||
Operating lease cost
|
$
|
13
|
|
$
|
36
|
|
Short-term lease cost
|
—
|
|
1
|
|
||
Variable lease cost
|
—
|
|
1
|
|
||
Sublease income
|
(1
|
)
|
(4
|
)
|
||
Total lease costs included in insurance operating costs and other expenses
|
$
|
12
|
|
$
|
34
|
|
|
September 30, 2019
|
||
Operating cash flows for operating leases (for the nine months ended)
|
$
|
36
|
|
Weighted-average remaining lease term in years for operating leases
|
6 years
|
|
|
Weighted-average discount rate for operating leases
|
3.6
|
%
|
|
As of September 30, 2019
|
||
2019
|
$
|
13
|
|
2020
|
51
|
|
|
2021
|
39
|
|
|
2022
|
33
|
|
|
2023
|
30
|
|
|
Thereafter
|
66
|
|
|
Total lease payments
|
232
|
|
|
Less: Discount on lease payments to present value
|
23
|
|
|
Total lease liability
|
$
|
209
|
|
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
||||
|
2018
|
2018
|
||||
Revenues
|
|
|
||||
Earned premiums
|
$
|
—
|
|
$
|
39
|
|
Fee income and other
|
—
|
|
382
|
|
||
Net investment income
|
—
|
|
519
|
|
||
Net realized capital gains (losses)
|
4
|
|
(68
|
)
|
||
Total revenues
|
4
|
|
872
|
|
||
Benefits, losses and expenses
|
|
|
|
|||
Benefits, losses and loss adjustment expenses
|
—
|
|
535
|
|
||
Amortization of DAC
|
—
|
|
58
|
|
||
Insurance operating costs and other expenses [1]
|
(5
|
)
|
157
|
|
||
Total benefits, losses and expenses
|
(5
|
)
|
750
|
|
||
Income before income taxes
|
9
|
|
122
|
|
||
Income tax expense (benefit)
|
(7
|
)
|
2
|
|
||
Income from operations of discontinued operations, net of tax
|
16
|
|
120
|
|
||
Net realized capital gain (loss) on disposal, net of tax
|
(11
|
)
|
202
|
|
||
Income from discontinued operations, net of tax
|
$
|
5
|
|
$
|
322
|
|
|
Nine Months Ended September 30,
|
||
|
2018
|
||
Net cash provided by operating activities from discontinued operations
|
$
|
603
|
|
Net cash provided by investing activities from discontinued operations
|
$
|
463
|
|
Net cash used in financing activities from discontinued operations [1]
|
$
|
(737
|
)
|
Cash paid for interest
|
$
|
—
|
|
[1]
|
Excludes return of capital to parent of $619 for the nine months ended September 30, 2018.
|
Description
|
Page
|
Key Performance Measures and Ratios
|
|
Commercial Lines
|
|
Personal Lines
|
|
Hartford Funds
|
|
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
||||||||||
|
2019
|
2018
|
2019
|
2018
|
||||||||
Net income
|
$
|
535
|
|
$
|
432
|
|
$
|
1,537
|
|
$
|
1,611
|
|
Preferred stock dividends
|
11
|
|
—
|
|
16
|
|
—
|
|
||||
Net income available to common stockholders
|
524
|
|
432
|
|
1,521
|
|
1,611
|
|
||||
Adjustments to reconcile net income available to common stockholders to core earnings:
|
|
|
|
|
|
|
|
|
||||
Net realized capital gains excluded from core earnings, before tax
|
(88
|
)
|
(37
|
)
|
(327
|
)
|
(57
|
)
|
||||
Loss on extinguishment of debt, before tax
|
90
|
|
—
|
|
90
|
|
6
|
|
||||
Loss on reinsurance transaction, before tax
|
—
|
|
—
|
|
91
|
|
—
|
|
||||
Integration and transaction costs associated with acquired business, before tax
|
29
|
|
12
|
|
70
|
|
35
|
|
||||
Change in loss reserves upon acquisition of a business, before tax
|
—
|
|
—
|
|
97
|
|
—
|
|
||||
Income tax expense (benefit)
|
(7
|
)
|
16
|
|
(2
|
)
|
18
|
|
||||
Income from discontinued operations, net of tax
|
—
|
|
(5
|
)
|
—
|
|
(322
|
)
|
||||
Core earnings
|
$
|
548
|
|
$
|
418
|
|
$
|
1,540
|
|
$
|
1,291
|
|
Net Income Available to Common Stockholders
|
Net Income Available to Common Stockholders per Diluted Share
|
Book Value per Diluted Share
|
Net Investment Income
|
Annualized Investment Yield, Net of tax
|
P&C Written Premiums
|
P&C Combined Ratio
|
Net Income Margin - Group Benefits
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||
|
2019
|
2018
|
Change
|
|
2019
|
2018
|
Change
|
||||||||||
Earned premiums
|
$
|
4,394
|
|
$
|
3,987
|
|
10
|
%
|
|
$
|
12,500
|
|
$
|
11,872
|
|
5
|
%
|
Fee income
|
330
|
|
344
|
|
(4
|
%)
|
|
970
|
|
994
|
|
(2
|
%)
|
||||
Net investment income
|
490
|
|
444
|
|
10
|
%
|
|
1,448
|
|
1,323
|
|
9
|
%
|
||||
Net realized capital gains
|
89
|
|
38
|
|
134
|
%
|
|
332
|
|
60
|
|
NM
|
|
||||
Other revenues
|
44
|
|
29
|
|
52
|
%
|
|
129
|
|
73
|
|
77
|
%
|
||||
Total revenues
|
5,347
|
|
4,842
|
|
10
|
%
|
|
15,379
|
|
14,322
|
|
7
|
%
|
||||
Benefits, losses and loss adjustment expenses
|
2,914
|
|
2,786
|
|
5
|
%
|
|
8,533
|
|
8,219
|
|
4
|
%
|
||||
Amortization of deferred policy acquisition costs
|
437
|
|
348
|
|
26
|
%
|
|
1,184
|
|
1,034
|
|
15
|
%
|
||||
Insurance operating costs and other expenses
|
1,167
|
|
1,091
|
|
7
|
%
|
|
3,356
|
|
3,195
|
|
5
|
%
|
||||
Loss on extinguishment of debt
|
90
|
|
—
|
|
NM
|
|
|
90
|
|
6
|
|
NM
|
|
||||
Loss on reinsurance transaction
|
—
|
|
—
|
|
—
|
%
|
|
91
|
|
—
|
|
NM
|
|
||||
Interest expense
|
67
|
|
69
|
|
(3
|
%)
|
|
194
|
|
228
|
|
(15
|
%)
|
||||
Amortization of other intangible assets
|
19
|
|
18
|
|
6
|
%
|
|
47
|
|
54
|
|
(13
|
%)
|
||||
Total benefits, losses and expenses
|
4,694
|
|
4,312
|
|
9
|
%
|
|
13,495
|
|
12,736
|
|
6
|
%
|
||||
Income from continuing operations, before tax
|
653
|
|
530
|
|
23
|
%
|
|
1,884
|
|
1,586
|
|
19
|
%
|
||||
Income tax expense
|
118
|
|
103
|
|
15
|
%
|
|
347
|
|
297
|
|
17
|
%
|
||||
Income from continuing operations, net of tax
|
535
|
|
427
|
|
25
|
%
|
|
1,537
|
|
1,289
|
|
19
|
%
|
||||
Income from discontinued operations, net of tax
|
—
|
|
5
|
|
(100
|
%)
|
|
—
|
|
322
|
|
(100
|
%)
|
||||
Net income
|
535
|
|
432
|
|
24
|
%
|
|
1,537
|
|
1,611
|
|
(5
|
%)
|
||||
Preferred stock dividends
|
11
|
|
—
|
|
NM
|
|
|
16
|
|
—
|
|
NM
|
|
||||
Net income available to common stockholders
|
$
|
524
|
|
$
|
432
|
|
21
|
%
|
|
$
|
1,521
|
|
$
|
1,611
|
|
(6
|
%)
|
Composition of Invested Assets
|
|||||||||||
|
September 30, 2019
|
|
December 31, 2018
|
||||||||
|
Amount
|
Percent
|
|
Amount
|
Percent
|
||||||
Fixed maturities, available-for-sale ("AFS"), at fair value
|
$
|
42,389
|
|
80.6
|
%
|
|
$
|
35,652
|
|
76.2
|
%
|
Fixed maturities, at fair value using the fair value option ("FVO")
|
39
|
|
0.1
|
%
|
|
22
|
|
—
|
%
|
||
Equity securities, at fair value
|
1,414
|
|
2.7
|
%
|
|
1,214
|
|
2.6
|
%
|
||
Mortgage loans
|
3,736
|
|
7.1
|
%
|
|
3,704
|
|
7.9
|
%
|
||
Limited partnerships and other alternative investments
|
1,770
|
|
3.3
|
%
|
|
1,723
|
|
3.7
|
%
|
||
Other investments [1]
|
302
|
|
0.6
|
%
|
|
192
|
|
0.4
|
%
|
||
Short-term investments
|
2,927
|
|
5.6
|
%
|
|
4,283
|
|
9.2
|
%
|
||
Total investments
|
$
|
52,577
|
|
100.0
|
%
|
|
$
|
46,790
|
|
100.0
|
%
|
[1]
|
Primarily consists of investments of consolidated investment funds and derivative instruments which are carried at fair value.
|
Net Investment Income
|
|||||||||||||||||||||
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||||||
|
2019
|
2018
|
|
2019
|
2018
|
||||||||||||||||
(Before tax)
|
Amount
|
Yield [1]
|
Amount
|
Yield [1]
|
|
Amount
|
Yield [1]
|
Amount
|
Yield [1]
|
||||||||||||
Fixed maturities [2]
|
$
|
392
|
|
3.8
|
%
|
$
|
370
|
|
3.9
|
%
|
|
$
|
1,159
|
|
3.9
|
%
|
$
|
1,077
|
|
3.9
|
%
|
Equity securities
|
12
|
|
3.4
|
%
|
6
|
|
2.5
|
%
|
|
31
|
|
3.0
|
%
|
18
|
|
2.4
|
%
|
||||
Mortgage loans
|
37
|
|
4.2
|
%
|
35
|
|
4.0
|
%
|
|
118
|
|
4.3
|
%
|
102
|
|
4.1
|
%
|
||||
Limited partnerships and other alternative investments
|
65
|
|
15.3
|
%
|
45
|
|
10.6
|
%
|
|
181
|
|
14.7
|
%
|
157
|
|
13.3
|
%
|
||||
Other [3]
|
5
|
|
|
10
|
|
|
|
21
|
|
|
27
|
|
|
||||||||
Investment expense
|
(21
|
)
|
|
(22
|
)
|
|
|
(62
|
)
|
|
(58
|
)
|
|
||||||||
Total net investment income
|
$
|
490
|
|
4.0
|
%
|
$
|
444
|
|
4.0
|
%
|
|
$
|
1,448
|
|
4.1
|
%
|
$
|
1,323
|
|
4.0
|
%
|
Total net investment income excluding limited partnerships and other alternative investments
|
$
|
425
|
|
3.6
|
%
|
$
|
399
|
|
3.7
|
%
|
|
$
|
1,267
|
|
3.7
|
%
|
$
|
1,166
|
|
3.7
|
%
|
[1]
|
Yields calculated using annualized net investment income divided by the monthly average invested assets at amortized cost as applicable, excluding repurchase agreement and securities lending collateral, if any, and derivatives book value.
|
[2]
|
Includes net investment income on short-term investments.
|
[3]
|
Includes income from derivatives that qualify for hedge accounting and hedge fixed maturities.
|
Net Realized Capital Gains
|
|||||||||||||
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||
(Before tax)
|
2019
|
2018
|
|
2019
|
2018
|
||||||||
Gross gains on sales
|
$
|
77
|
|
$
|
26
|
|
|
$
|
190
|
|
$
|
91
|
|
Gross losses on sales
|
(4
|
)
|
(41
|
)
|
|
(44
|
)
|
(129
|
)
|
||||
Equity securities [1]
|
19
|
|
46
|
|
|
181
|
|
88
|
|
||||
Net other-than-temporary impairment ("OTTI") losses recognized in earnings [2]
|
(1
|
)
|
(1
|
)
|
|
(3
|
)
|
(1
|
)
|
||||
Valuation allowances on mortgage loans [2]
|
—
|
|
—
|
|
|
1
|
|
—
|
|
||||
Transactional foreign currency revaluation
|
—
|
|
—
|
|
|
—
|
|
1
|
|
||||
Non-qualifying foreign currency derivatives
|
2
|
|
1
|
|
|
2
|
|
2
|
|
||||
Other, net [3]
|
(4
|
)
|
7
|
|
|
5
|
|
8
|
|
||||
Net realized capital gains
|
$
|
89
|
|
$
|
38
|
|
|
$
|
332
|
|
$
|
60
|
|
[1]
|
Includes all changes in fair value and trading gains and losses for equity securities. The net unrealized gain (loss) on equity securities included in net realized capital gains (losses) related to equity securities still held as of September 30, 2019, were $17 and $100 for the three and nine months ended September 30, 2019, respectively. The net unrealized gain (loss) on equity securities included in net realized capital gains (losses) related to equity securities still held as of September 30, 2018, were $41 and $50 for the three and nine months ended September 30, 2018, respectively.
|
[2]
|
See Other-Than-Temporary Impairments and Valuation Allowances on Mortgage Loans within the Investment Portfolio Risks and Risk Management section of the MD&A.
|
[3]
|
Primarily consists of changes in value of non-qualifying derivatives, including credit derivatives and interest rate derivatives used to manage duration.
|
•
|
property and casualty insurance product reserves, net of reinsurance;
|
•
|
group benefit long-term disability (LTD) reserves, net of reinsurance;
|
•
|
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.
|
Rollforward of Property and Casualty Insurance Product Liabilities for Unpaid Losses and LAE for the Nine Months Ended September 30, 2019
|
||||||||||||
|
Commercial
Lines |
Personal
Lines |
Property & Casualty Other Operations
|
Total Property & Casualty Insurance
|
||||||||
Beginning liabilities for unpaid losses and loss adjustment expenses, gross
|
$
|
19,455
|
|
$
|
2,456
|
|
$
|
2,673
|
|
$
|
24,584
|
|
Reinsurance and other recoverables
|
3,137
|
|
108
|
|
987
|
|
4,232
|
|
||||
Beginning liabilities for unpaid losses and loss adjustment expenses, net
|
16,318
|
|
2,348
|
|
1,686
|
|
20,352
|
|
||||
Navigators Group acquisition
|
2,001
|
|
|
|
|
|
2,001
|
|
||||
Provision for unpaid losses and loss adjustment expenses
|
|
|
|
|
|
|
|
|
||||
Current accident year before catastrophes
|
3,552
|
|
1,548
|
|
—
|
|
5,100
|
|
||||
Current accident year ("CAY") catastrophes
|
234
|
|
114
|
|
—
|
|
348
|
|
||||
Prior accident year development ("PYD")
|
(7
|
)
|
(25
|
)
|
9
|
|
(23
|
)
|
||||
Total provision for unpaid losses and loss adjustment expenses
|
3,779
|
|
1,637
|
|
9
|
|
5,425
|
|
||||
Payments
|
(2,981
|
)
|
(1,841
|
)
|
(130
|
)
|
(4,952
|
)
|
||||
Foreign currency adjustment
|
(12
|
)
|
—
|
|
—
|
|
(12
|
)
|
||||
Ending liabilities for unpaid losses and loss adjustment expenses, net
|
19,105
|
|
2,144
|
|
1,565
|
|
22,814
|
|
||||
Reinsurance and other recoverables
|
4,006
|
|
109
|
|
968
|
|
5,083
|
|
||||
Ending liabilities for unpaid losses and loss adjustment expenses, gross
|
$
|
23,111
|
|
$
|
2,253
|
|
$
|
2,533
|
|
$
|
27,897
|
|
Earned premiums and fee income
|
$
|
6,040
|
|
$
|
2,431
|
|
|
|
||||
Loss and loss expense paid ratio [1]
|
49.4
|
|
75.7
|
|
|
|
||||||
Loss and loss expense incurred ratio
|
62.8
|
|
68.1
|
|
|
|
||||||
Prior accident year development (pts) [2]
|
(0.1
|
)
|
(1.0
|
)
|
|
|
[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.
|
Current Accident Year Catastrophe Losses for the Nine Months Ended September 30, 2019, Net of Reinsurance
|
|||||||||
|
Commercial
Lines |
Personal
Lines |
Total
|
||||||
Wind and hail
|
$
|
140
|
|
$
|
87
|
|
$
|
227
|
|
Winter storms
|
57
|
|
19
|
|
76
|
|
|||
Tropical storms
|
6
|
|
4
|
|
10
|
|
|||
Hurricanes
|
23
|
|
4
|
|
27
|
|
|||
Earthquake
|
1
|
|
—
|
|
1
|
|
|||
Typhoon
|
6
|
|
—
|
|
6
|
|
|||
Other
|
1
|
|
—
|
|
1
|
|
|||
Total catastrophe losses
|
$
|
234
|
|
$
|
114
|
|
$
|
348
|
|
Unfavorable (Favorable) Prior Accident Year Development for the Nine Months Ended September 30, 2019
|
||||||||||||
|
Commercial Lines
|
Personal
Lines
|
Property & Casualty Other Operations
|
Total Property & Casualty Insurance
|
||||||||
Workers’ compensation
|
$
|
(90
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
(90
|
)
|
Workers’ compensation discount accretion
|
25
|
|
—
|
|
—
|
|
25
|
|
||||
General liability
|
62
|
|
—
|
|
—
|
|
62
|
|
||||
Marine
|
8
|
|
—
|
|
—
|
|
8
|
|
||||
Package business
|
(32
|
)
|
—
|
|
—
|
|
(32
|
)
|
||||
Commercial property
|
(16
|
)
|
—
|
|
—
|
|
(16
|
)
|
||||
Professional liability
|
32
|
|
—
|
|
—
|
|
32
|
|
||||
Bond
|
(2
|
)
|
—
|
|
—
|
|
(2
|
)
|
||||
Assumed Reinsurance
|
3
|
|
—
|
|
—
|
|
3
|
|
||||
Automobile liability
|
27
|
|
(28
|
)
|
—
|
|
(1
|
)
|
||||
Homeowners
|
—
|
|
—
|
|
—
|
|
—
|
|
||||
Net asbestos reserves
|
—
|
|
—
|
|
—
|
|
—
|
|
||||
Net environmental reserves
|
—
|
|
—
|
|
—
|
|
—
|
|
||||
Catastrophes
|
(33
|
)
|
6
|
|
—
|
|
(27
|
)
|
||||
Uncollectible reinsurance
|
—
|
|
—
|
|
—
|
|
—
|
|
||||
Other reserve re-estimates, net
|
9
|
|
(3
|
)
|
9
|
|
15
|
|
||||
Total prior accident year development
|
$
|
(7
|
)
|
$
|
(25
|
)
|
$
|
9
|
|
$
|
(23
|
)
|
Rollforward of Property and Casualty Insurance Product Liabilities for Unpaid Losses and LAE for the Nine Months Ended September 30, 2018
|
||||||||||||
|
Commercial
Lines
|
Personal
Lines
|
Property & Casualty Other Operations
|
Total Property & Casualty Insurance
|
||||||||
Beginning liabilities for unpaid losses and loss adjustment expenses, gross
|
$
|
18,893
|
|
$
|
2,294
|
|
$
|
2,588
|
|
$
|
23,775
|
|
Reinsurance and other recoverables
|
3,147
|
|
71
|
|
739
|
|
3,957
|
|
||||
Beginning liabilities for unpaid losses and loss adjustment expenses, net
|
15,746
|
|
2,223
|
|
1,849
|
|
19,818
|
|
||||
Provision for unpaid losses and loss adjustment expenses
|
|
|
|
|
||||||||
Current accident year before catastrophes
|
3,003
|
|
1,688
|
|
—
|
|
4,691
|
|
||||
Current accident year catastrophes
|
238
|
|
222
|
|
—
|
|
460
|
|
||||
Prior accident year development
|
(145
|
)
|
(21
|
)
|
27
|
|
(139
|
)
|
||||
Total provision for unpaid losses and loss adjustment expenses
|
3,096
|
|
1,889
|
|
27
|
|
5,012
|
|
||||
Payments
|
(2,676
|
)
|
(1,967
|
)
|
(170
|
)
|
(4,813
|
)
|
||||
Ending liabilities for unpaid losses and loss adjustment expenses, net
|
16,166
|
|
2,145
|
|
1,706
|
|
20,017
|
|
||||
Reinsurance and other recoverables
|
3,089
|
|
21
|
|
670
|
|
3,780
|
|
||||
Ending liabilities for unpaid losses and loss adjustment expenses, gross
|
$
|
19,255
|
|
$
|
2,166
|
|
$
|
2,376
|
|
$
|
23,797
|
|
Earned premiums and fee income
|
$
|
5,267
|
|
$
|
2,594
|
|
|
|
||||
Loss and loss expense paid ratio [1]
|
50.8
|
|
75.8
|
|
|
|
||||||
Loss and loss expense incurred ratio
|
59.1
|
|
73.7
|
|
|
|
||||||
Prior accident year development (pts) [2]
|
(2.8
|
)
|
(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.
|
Current Accident Year Catastrophe Losses for the Nine Months Ended September 30, 2018, Net of Reinsurance
|
|||||||||
|
Commercial
Lines
|
Personal
Lines |
Total
|
||||||
Wind and hail
|
$
|
118
|
|
$
|
158
|
|
$
|
276
|
|
Winter storms
|
57
|
|
22
|
|
79
|
|
|||
Flooding
|
1
|
|
1
|
|
2
|
|
|||
Volcanic eruption
|
—
|
|
2
|
|
2
|
|
|||
Wildfire
|
2
|
|
32
|
|
34
|
|
|||
Hurricane
|
59
|
|
6
|
|
65
|
|
|||
Massachusetts gas explosion
|
1
|
|
1
|
|
2
|
|
|||
Total catastrophe losses
|
$
|
238
|
|
$
|
222
|
|
$
|
460
|
|
Unfavorable (Favorable) Prior Accident Year Development for the Nine Months Ended September 30, 2018
|
||||||||||||
|
Commercial Lines
|
Personal
Lines
|
Property & Casualty Other Operations
|
Total Property & Casualty Insurance
|
||||||||
Workers’ compensation
|
$
|
(97
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
(97
|
)
|
Workers’ compensation discount accretion
|
30
|
|
—
|
|
—
|
|
30
|
|
||||
General liability
|
32
|
|
—
|
|
—
|
|
32
|
|
||||
Package business
|
(16
|
)
|
—
|
|
—
|
|
(16
|
)
|
||||
Commercial property
|
(10
|
)
|
—
|
|
—
|
|
(10
|
)
|
||||
Professional liability
|
(12
|
)
|
—
|
|
—
|
|
(12
|
)
|
||||
Bond
|
—
|
|
—
|
|
—
|
|
—
|
|
||||
Automobile liability
|
(15
|
)
|
(10
|
)
|
—
|
|
(25
|
)
|
||||
Homeowners
|
—
|
|
(20
|
)
|
—
|
|
(20
|
)
|
||||
Net asbestos reserves
|
—
|
|
—
|
|
—
|
|
—
|
|
||||
Net environmental reserves
|
—
|
|
—
|
|
—
|
|
—
|
|
||||
Catastrophes
|
(63
|
)
|
16
|
|
—
|
|
(47
|
)
|
||||
Uncollectible reinsurance
|
—
|
|
—
|
|
22
|
|
22
|
|
||||
Other reserve re-estimates, net
|
6
|
|
(7
|
)
|
5
|
|
4
|
|
||||
Total prior accident year development
|
$
|
(145
|
)
|
$
|
(21
|
)
|
$
|
27
|
|
$
|
(139
|
)
|
COMMERCIAL LINES
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||
|
2019
|
2018
|
Change
|
|
2019
|
2018
|
Change
|
||||||||||
Written premiums
|
$
|
2,235
|
|
$
|
1,751
|
|
28
|
%
|
|
$
|
6,262
|
|
$
|
5,336
|
|
17
|
%
|
Change in unearned premium reserve
|
(15
|
)
|
(34
|
)
|
56
|
%
|
|
248
|
|
95
|
|
161
|
%
|
||||
Earned premiums
|
2,250
|
|
1,785
|
|
26
|
%
|
|
6,014
|
|
5,241
|
|
15
|
%
|
||||
Fee income
|
8
|
|
9
|
|
(11
|
%)
|
|
26
|
|
26
|
|
—
|
%
|
||||
Losses and loss adjustment expenses
|
|
|
|
|
|
|
|
|
|||||||||
Current accident year before catastrophes
|
1,336
|
|
1,055
|
|
27
|
%
|
|
3,552
|
|
3,003
|
|
18
|
%
|
||||
Current accident year catastrophes [1]
|
74
|
|
95
|
|
(22
|
%)
|
|
234
|
|
238
|
|
(2
|
%)
|
||||
Prior accident year development [1]
|
(19
|
)
|
(53
|
)
|
64
|
%
|
|
(7
|
)
|
(145
|
)
|
95
|
%
|
||||
Total losses and loss adjustment expenses
|
1,391
|
|
1,097
|
|
27
|
%
|
|
3,779
|
|
3,096
|
|
22
|
%
|
||||
Amortization of deferred policy acquisition costs
|
356
|
|
264
|
|
35
|
%
|
|
940
|
|
780
|
|
21
|
%
|
||||
Underwriting expenses
|
410
|
|
353
|
|
16
|
%
|
|
1,139
|
|
1,013
|
|
12
|
%
|
||||
Amortization of other intangible assets
|
7
|
|
2
|
|
NM
|
|
|
11
|
|
3
|
|
NM
|
|
||||
Dividends to policyholders
|
12
|
|
8
|
|
50
|
%
|
|
24
|
|
18
|
|
33
|
%
|
||||
Underwriting gain
|
82
|
|
70
|
|
17
|
%
|
|
147
|
|
357
|
|
(59
|
%)
|
||||
Net servicing income
|
2
|
|
(1
|
)
|
NM
|
|
|
3
|
|
—
|
|
NM
|
|
||||
Net investment income [2]
|
291
|
|
250
|
|
16
|
%
|
|
831
|
|
750
|
|
11
|
%
|
||||
Net realized capital gains [2]
|
60
|
|
29
|
|
107
|
%
|
|
229
|
|
63
|
|
NM
|
|
||||
Loss on reinsurance transaction
|
—
|
|
—
|
|
—
|
%
|
|
(91
|
)
|
—
|
|
NM
|
|
||||
Other income (expenses)
|
(20
|
)
|
2
|
|
NM
|
|
|
(27
|
)
|
1
|
|
NM
|
|
||||
Income before income taxes
|
415
|
|
350
|
|
19
|
%
|
|
1,092
|
|
1,171
|
|
(7
|
%)
|
||||
Income tax expense [3]
|
79
|
|
61
|
|
30
|
%
|
|
202
|
|
212
|
|
(5
|
%)
|
||||
Net income
|
$
|
336
|
|
$
|
289
|
|
16
|
%
|
|
$
|
890
|
|
$
|
959
|
|
(7
|
%)
|
[1]
|
For discussion of current accident year catastrophes and prior accident year development, see MD&A - Critical Accounting Estimates, Property and Casualty Insurance Product Reserves, Net of Reinsurance.
|
[2]
|
For discussion of consolidated investment results, see MD&A - Investment Results.
|
[3]
|
For discussion of income taxes, see Note 11 - Income Taxes of Notes to Condensed Consolidated Financial Statements.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||
|
2019
|
2018
|
|
2019
|
2018
|
||||||||
Small commercial new business premium
|
$
|
150
|
|
$
|
145
|
|
|
$
|
508
|
|
$
|
443
|
|
Middle market new business premium
|
146
|
|
131
|
|
|
463
|
|
404
|
|
||||
Small commercial policy count retention
|
83
|
%
|
83
|
%
|
|
83
|
%
|
82
|
%
|
||||
Middle market policy count retention [1]
|
83
|
%
|
78
|
%
|
|
82
|
%
|
78
|
%
|
||||
Standard commercial lines renewal written price increases [1] [2]
|
2.8
|
%
|
1.9
|
%
|
|
2.3
|
%
|
2.6
|
%
|
||||
Standard commercial lines renewal earned price increases [1] [2]
|
2.2
|
%
|
3.0
|
%
|
|
2.2
|
%
|
3.2
|
%
|
||||
Small commercial policies in-force as of end of period (in thousands)
|
1,294
|
|
1,264
|
|
|
|
|
||||||
Middle market policies in-force as of end of period (in thousands) [1]
|
64
|
|
64
|
|
|
|
|
[1]
|
Excludes certain risk classes of higher hazard general liability in middle market.
|
[2]
|
Small commercial and middle market lines within middle & large commercial are generally referred to as standard commercial lines.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||
|
2019
|
2018
|
Change
|
|
2019
|
2018
|
Change
|
||||||
Loss and loss adjustment expense ratio
|
|
|
|
|
|
|
|
||||||
Current accident year before catastrophes
|
59.4
|
|
59.1
|
|
0.3
|
|
|
59.1
|
|
57.3
|
|
1.8
|
|
Current accident year catastrophes
|
3.3
|
|
5.3
|
|
(2.0
|
)
|
|
3.9
|
|
4.5
|
|
(0.6
|
)
|
Prior accident year development
|
(0.8
|
)
|
(3.0
|
)
|
2.2
|
|
|
(0.1
|
)
|
(2.8
|
)
|
2.7
|
|
Total loss and loss adjustment expense ratio
|
61.8
|
|
61.5
|
|
0.3
|
|
|
62.8
|
|
59.1
|
|
3.7
|
|
Expense ratio
|
34.0
|
|
34.2
|
|
(0.2
|
)
|
|
34.3
|
|
33.8
|
|
0.5
|
|
Policyholder dividend ratio
|
0.5
|
|
0.4
|
|
0.1
|
|
|
0.4
|
|
0.3
|
|
0.1
|
|
Combined ratio
|
96.4
|
|
96.1
|
|
0.3
|
|
|
97.6
|
|
93.2
|
|
4.4
|
|
Current accident year catastrophes and prior year development
|
2.5
|
|
2.3
|
|
0.2
|
|
|
3.8
|
|
1.7
|
|
2.1
|
|
Current accident year change in loss reserves upon acquisition of a business [1]
|
—
|
|
—
|
|
—
|
|
|
0.5
|
|
—
|
|
0.5
|
|
Underlying combined ratio
|
93.9
|
|
93.7
|
|
0.2
|
|
|
93.3
|
|
91.4
|
|
1.9
|
|
[1]
|
Upon acquisition of Navigators Group and a review of Navigators Insurers reserves, the nine months ended September 30, 2019 included $68 of prior accident year reserve increases and $29 of current accident year reserve increases which were excluded for the purposes of the underlying combined ratio calculation.
|
•
|
Small commercial written premium was flat for the three month period and increased for the nine month period. The increase for the nine month period was primarily driven by the business acquired under a 2018 renewal rights agreement with Farmers Group to acquire its Foremost-branded small commercial business.
|
•
|
Middle & large commercial written premium growth for both the three and nine month periods was primarily due to new business growth and higher renewal premium in core middle market lines, as well as growth in certain industry verticals, including construction, energy, large property and specialty programs. The increase in renewal premium was due to renewal written price increases and higher audit premium.
|
•
|
Global specialty written premium increased for both the three and nine month periods driven by the acquisition of Navigators as well as growth in financial products and bond.
|
PERSONAL LINES
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||
|
2019
|
2018
|
Change
|
|
2019
|
2018
|
Change
|
||||||||||
Written premiums
|
$
|
822
|
|
$
|
854
|
|
(4
|
%)
|
|
$
|
2,417
|
|
$
|
2,518
|
|
(4
|
%)
|
Change in unearned premium reserve
|
19
|
|
5
|
|
NM
|
|
|
14
|
|
(46
|
)
|
130
|
%
|
||||
Earned premiums
|
803
|
|
849
|
|
(5
|
%)
|
|
2,403
|
|
2,564
|
|
(6
|
%)
|
||||
Fee income
|
9
|
|
10
|
|
(10
|
%)
|
|
28
|
|
30
|
|
(7
|
%)
|
||||
Losses and loss adjustment expenses
|
|
|
|
|
|
|
|
||||||||||
Current accident year before catastrophes
|
531
|
|
565
|
|
(6
|
%)
|
|
1,548
|
|
1,688
|
|
(8
|
%)
|
||||
Current accident year catastrophes [1]
|
32
|
|
74
|
|
(57
|
%)
|
|
114
|
|
222
|
|
(49
|
%)
|
||||
Prior accident year development [1]
|
(28
|
)
|
(18
|
)
|
(56
|
%)
|
|
(25
|
)
|
(21
|
)
|
(19
|
%)
|
||||
Total losses and loss adjustment expenses
|
535
|
|
621
|
|
(14
|
%)
|
|
1,637
|
|
1,889
|
|
(13
|
%)
|
||||
Amortization of DAC
|
64
|
|
68
|
|
(6
|
%)
|
|
194
|
|
209
|
|
(7
|
%)
|
||||
Underwriting expenses
|
154
|
|
155
|
|
(1
|
%)
|
|
464
|
|
454
|
|
2
|
%
|
||||
Amortization of other intangible assets
|
1
|
|
1
|
|
—
|
%
|
|
4
|
|
3
|
|
33
|
%
|
||||
Underwriting gain
|
58
|
|
14
|
|
NM
|
|
|
132
|
|
39
|
|
NM
|
|
||||
Net servicing income [2]
|
4
|
|
5
|
|
(20
|
%)
|
|
11
|
|
13
|
|
(15
|
%)
|
||||
Net investment income [3]
|
46
|
|
39
|
|
18
|
%
|
|
134
|
|
116
|
|
16
|
%
|
||||
Net realized capital gains [3]
|
9
|
|
5
|
|
80
|
%
|
|
36
|
|
10
|
|
NM
|
|
||||
Other income (expenses)
|
—
|
|
1
|
|
(100
|
%)
|
|
(1
|
)
|
1
|
|
NM
|
|
||||
Income before income taxes
|
117
|
|
64
|
|
83
|
%
|
|
312
|
|
179
|
|
74
|
%
|
||||
Income tax expense [4]
|
23
|
|
13
|
|
77
|
%
|
|
60
|
|
33
|
|
82
|
%
|
||||
Net income
|
$
|
94
|
|
$
|
51
|
|
84
|
%
|
|
$
|
252
|
|
$
|
146
|
|
73
|
%
|
[1]
|
For discussion of current accident year catastrophes and prior accident year development, see MD&A - Critical Accounting Estimates, Property & Casualty Insurance Product Reserves, Net of Reinsurance.
|
[2]
|
Includes servicing revenues of $23 and $24 for the three months ended September 30, 2019 and 2018 and $65 and $66 for the nine months ended September 30, 2019 and 2018. Includes servicing expenses of $19 for both the three months ended September 30, 2019 and 2018, and $54 and $53 for the nine months ended September 30, 2019 and 2018.
|
[3]
|
For discussion of consolidated investment results, see MD&A - Investment Results.
|
[4]
|
For discussion of income taxes, see Note 11 - Income Taxes of Notes to Condensed Consolidated Financial Statements.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||
Written Premiums
|
2019
|
2018
|
Change
|
|
2019
|
2018
|
Change
|
||||||||||
Product Line
|
|
|
|
|
|
|
|
||||||||||
Automobile
|
$
|
562
|
|
$
|
583
|
|
(4
|
%)
|
|
$
|
1,681
|
|
$
|
1,750
|
|
(4
|
%)
|
Homeowners
|
260
|
|
271
|
|
(4
|
%)
|
|
736
|
|
768
|
|
(4
|
%)
|
||||
Total
|
$
|
822
|
|
$
|
854
|
|
(4
|
%)
|
|
$
|
2,417
|
|
$
|
2,518
|
|
(4
|
%)
|
Earned Premiums
|
|
|
|
|
|
|
|
|
|||||||||
Product Line
|
|
|
|
|
|
|
|
|
|||||||||
Automobile
|
$
|
558
|
|
$
|
591
|
|
(6
|
%)
|
|
$
|
1,670
|
|
$
|
1,787
|
|
(7
|
%)
|
Homeowners
|
245
|
|
258
|
|
(5
|
%)
|
|
733
|
|
777
|
|
(6
|
%)
|
||||
Total
|
$
|
803
|
|
$
|
849
|
|
(5
|
%)
|
|
$
|
2,403
|
|
$
|
2,564
|
|
(6
|
%)
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||
Premium Measures
|
2019
|
2018
|
|
2019
|
2018
|
||||||||
Policies in-force end of period (in thousands)
|
|
|
|
|
|
||||||||
Automobile
|
|
|
|
1,445
|
|
1,547
|
|
||||||
Homeowners
|
|
|
|
893
|
|
948
|
|
||||||
New business written premium
|
|
|
|
|
|
||||||||
Automobile
|
$
|
58
|
|
$
|
47
|
|
|
$
|
173
|
|
$
|
126
|
|
Homeowners
|
$
|
21
|
|
$
|
12
|
|
|
$
|
57
|
|
$
|
32
|
|
Policy count retention
|
|
|
|
|
|
||||||||
Automobile
|
85
|
%
|
83
|
%
|
|
85
|
%
|
82
|
%
|
||||
Homeowners
|
86
|
%
|
83
|
%
|
|
85
|
%
|
83
|
%
|
||||
Renewal written price increase
|
|
|
|
|
|
||||||||
Automobile
|
4.1
|
%
|
6.0
|
%
|
|
4.8
|
%
|
7.9
|
%
|
||||
Homeowners
|
5.9
|
%
|
9.9
|
%
|
|
6.9
|
%
|
9.9
|
%
|
||||
Renewal earned price increase
|
|
|
|
|
|
||||||||
Automobile
|
5.1
|
%
|
9.2
|
%
|
|
5.8
|
%
|
10.1
|
%
|
||||
Homeowners
|
8.0
|
%
|
9.6
|
%
|
|
8.8
|
%
|
9.2
|
%
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||
Underwriting Ratios
|
2019
|
2018
|
Change
|
|
2019
|
2018
|
Change
|
||||||
Loss and loss adjustment expense ratio
|
|
|
|
|
|
|
|
||||||
Current accident year before catastrophes
|
66.1
|
|
66.5
|
|
(0.4
|
)
|
|
64.4
|
|
65.8
|
|
(1.4
|
)
|
Current accident year catastrophes
|
4.0
|
|
8.7
|
|
(4.7
|
)
|
|
4.7
|
|
8.7
|
|
(4.0
|
)
|
Prior year development
|
(3.5
|
)
|
(2.1
|
)
|
(1.4
|
)
|
|
(1.0
|
)
|
(0.8
|
)
|
(0.2
|
)
|
Total loss and loss adjustment expense ratio
|
66.6
|
|
73.1
|
|
(6.5
|
)
|
|
68.1
|
|
73.7
|
|
(5.6
|
)
|
Expense ratio
|
26.2
|
|
25.2
|
|
1.0
|
|
|
26.4
|
|
24.8
|
|
1.6
|
|
Combined ratio
|
92.8
|
|
98.4
|
|
(5.6
|
)
|
|
94.5
|
|
98.5
|
|
(4.0
|
)
|
Current accident year catastrophes and prior year development
|
0.5
|
|
6.6
|
|
(6.1
|
)
|
|
3.7
|
|
7.9
|
|
(4.2
|
)
|
Underlying combined ratio
|
92.3
|
|
91.8
|
|
0.5
|
|
|
90.8
|
|
90.6
|
|
0.2
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||
|
2019
|
2018
|
Change
|
|
2019
|
2018
|
Change
|
||||||
Automobile
|
|
|
|
|
|
|
|
|
|
||||
Combined ratio
|
95.7
|
|
98.9
|
|
(3.2
|
)
|
|
95.3
|
|
97.2
|
|
(1.9
|
)
|
Underlying combined ratio
|
98.8
|
|
98.5
|
|
0.3
|
|
|
96.4
|
|
96.4
|
|
—
|
|
Homeowners
|
|
|
|
|
|
|
|
|
|
||||
Combined ratio
|
86.5
|
|
96.9
|
|
(10.4
|
)
|
|
93.0
|
|
101.5
|
|
(8.5
|
)
|
Underlying combined ratio
|
76.6
|
|
76.3
|
|
0.3
|
|
|
78.1
|
|
77.2
|
|
0.9
|
|
PROPERTY & CASUALTY OTHER OPERATIONS
|
|
Three Months Ended September 30,
|
|
Nine months ended September 30,
|
||||||||||||||
|
2019
|
2018
|
Change
|
|
2019
|
2018
|
Change
|
||||||||||
Losses and loss adjustment expenses
|
|
|
|
|
|
|
|
|
|||||||||
Prior accident year development [1]
|
$
|
—
|
|
$
|
11
|
|
(100
|
%)
|
|
$
|
9
|
|
$
|
27
|
|
(67
|
%)
|
Total losses and loss adjustment expenses
|
—
|
|
11
|
|
(100
|
%)
|
|
9
|
|
27
|
|
(67
|
%)
|
||||
Underwriting expenses
|
3
|
|
3
|
|
—
|
%
|
|
9
|
|
9
|
|
—
|
%
|
||||
Underwriting loss
|
(3
|
)
|
(14
|
)
|
79
|
%
|
|
(18
|
)
|
(36
|
)
|
50
|
%
|
||||
Net investment income [2]
|
21
|
|
22
|
|
(5
|
%)
|
|
64
|
|
68
|
|
(6
|
%)
|
||||
Net realized capital gains [2]
|
4
|
|
3
|
|
33
|
%
|
|
17
|
|
5
|
|
NM
|
|
||||
Income before income taxes
|
22
|
|
11
|
|
100
|
%
|
|
63
|
|
37
|
|
70
|
%
|
||||
Income tax expense [3]
|
4
|
|
2
|
|
100
|
%
|
|
11
|
|
6
|
|
83
|
%
|
||||
Net income
|
$
|
18
|
|
$
|
9
|
|
100
|
%
|
|
$
|
52
|
|
$
|
31
|
|
68
|
%
|
[1]
|
For discussion of prior accident year development, see MD&A - Critical Accounting Estimates, Property and Casualty Insurance Product Reserves, Net of Reinsurance.
|
[2]
|
For discussion of consolidated investment results, see MD&A - Investment Results.
|
[3]
|
For discussion of income taxes, see Note 11 - Income Taxes of Notes to Condensed Consolidated Financial Statements.
|
GROUP BENEFITS
|
Operating Summary
|
|||||||||||||||||
|
Three Months Ended September 30,
|
|
Nine months ended September 30,
|
||||||||||||||
|
2019
|
2018
|
Change
|
|
2019
|
2018
|
Change
|
||||||||||
Premiums and other considerations
|
$
|
1,382
|
|
$
|
1,396
|
|
(1
|
%)
|
|
$
|
4,213
|
|
$
|
4,198
|
|
—
|
%
|
Net investment income [1]
|
121
|
|
117
|
|
3
|
%
|
|
363
|
|
353
|
|
3
|
%
|
||||
Net realized capital gains (losses) [1]
|
14
|
|
(3
|
)
|
NM
|
|
|
26
|
|
(26
|
)
|
NM
|
|
||||
Total revenues
|
1,517
|
|
1,510
|
|
—
|
%
|
|
4,602
|
|
4,525
|
|
2
|
%
|
||||
Benefits, losses and loss adjustment expenses
|
983
|
|
1,054
|
|
(7
|
%)
|
|
3,098
|
|
3,198
|
|
(3
|
%)
|
||||
Amortization of DAC
|
14
|
|
12
|
|
17
|
%
|
|
41
|
|
33
|
|
24
|
%
|
||||
Insurance operating costs and other expenses
|
329
|
|
319
|
|
3
|
%
|
|
968
|
|
957
|
|
1
|
%
|
||||
Amortization of other intangible assets
|
10
|
|
15
|
|
(33
|
%)
|
|
31
|
|
48
|
|
(35
|
%)
|
||||
Total benefits, losses and expenses
|
1,336
|
|
1,400
|
|
(5
|
%)
|
|
4,138
|
|
4,236
|
|
(2
|
%)
|
||||
Income before income taxes
|
181
|
|
110
|
|
65
|
%
|
|
464
|
|
289
|
|
61
|
%
|
||||
Income tax expense [2]
|
35
|
|
33
|
|
6
|
%
|
|
87
|
|
62
|
|
40
|
%
|
||||
Net income
|
$
|
146
|
|
$
|
77
|
|
90
|
%
|
|
$
|
377
|
|
$
|
227
|
|
66
|
%
|
[1]
|
For discussion of consolidated investment results, see MD&A - Investment Results.
|
[2]
|
For discussion of income taxes, see Note 11 - Income Taxes of Notes to the Condensed Consolidated Financial Statements.
|
Premiums and Other Considerations
|
|||||||||||||||||
|
Three Months Ended September 30,
|
|
Nine months ended September 30,
|
||||||||||||||
|
2019
|
2018
|
Change
|
|
2019
|
2018
|
Change
|
||||||||||
Fully insured – ongoing premiums
|
$
|
1,337
|
|
$
|
1,353
|
|
(1
|
%)
|
|
$
|
4,072
|
|
$
|
4,062
|
|
—
|
%
|
Buyout premiums
|
—
|
|
—
|
|
—
|
%
|
|
6
|
|
5
|
|
20
|
%
|
||||
Fee income
|
45
|
|
43
|
|
5
|
%
|
|
135
|
|
131
|
|
3
|
%
|
||||
Total premiums and other considerations
|
$
|
1,382
|
|
$
|
1,396
|
|
(1
|
%)
|
|
$
|
4,213
|
|
$
|
4,198
|
|
—
|
%
|
Fully insured ongoing sales, excluding buyouts
|
$
|
74
|
|
$
|
104
|
|
(29
|
%)
|
|
$
|
580
|
|
$
|
643
|
|
(10
|
%)
|
Ratios, Excluding Buyouts
|
|||||||||||
|
Three Months Ended September 30,
|
|
Nine months ended September 30,
|
||||||||
|
2019
|
2018
|
Change
|
|
2019
|
2018
|
Change
|
||||
Group disability loss ratio
|
64.4
|
%
|
75.9
|
%
|
(11.5)
|
|
69.0
|
%
|
75.0
|
%
|
(6.0)
|
Group life loss ratio
|
80.8
|
%
|
76.6
|
%
|
4.2
|
|
80.0
|
%
|
78.3
|
%
|
1.7
|
Total loss ratio
|
71.1
|
%
|
75.5
|
%
|
(4.4)
|
|
73.5
|
%
|
76.2
|
%
|
(2.7)
|
Expense ratio [1]
|
24.9
|
%
|
23.9
|
%
|
1.0
|
|
24.1
|
%
|
23.9
|
%
|
0.2
|
Margin
|
|||||||||||||
|
Three Months Ended September 30,
|
|
Nine months ended September 30,
|
||||||||||
|
2019
|
2018
|
Change
|
|
2019
|
2018
|
Change
|
||||||
Net income margin
|
9.6
|
%
|
5.1
|
%
|
4.5
|
|
|
8.2
|
%
|
5.0
|
%
|
3.2
|
|
Adjustments to reconcile net income margin to core earnings margin:
|
|
|
|
|
|
|
|
||||||
Net realized capital losses (gains) excluded from core earnings, before tax
|
(0.9
|
%)
|
0.2
|
%
|
(1.1
|
)
|
|
(0.5
|
%)
|
0.6
|
%
|
(1.1
|
)
|
Integration and transaction costs associated with acquired business, before tax
|
0.6
|
%
|
0.8
|
%
|
(0.2
|
)
|
|
0.6
|
%
|
0.8
|
%
|
(0.2
|
)
|
Income tax benefit
|
0.1
|
%
|
0.6
|
%
|
(0.5
|
)
|
|
—
|
%
|
—
|
%
|
—
|
|
Core earnings margin
|
9.4
|
%
|
6.7
|
%
|
2.7
|
|
|
8.3
|
%
|
6.4
|
%
|
1.9
|
|
HARTFORD FUNDS
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||
|
2019
|
2018
|
Change
|
|
2019
|
2018
|
Change
|
||||||||||
Fee income and other revenue
|
$
|
254
|
|
$
|
267
|
|
(5
|
%)
|
|
$
|
743
|
|
$
|
786
|
|
(5
|
%)
|
Net investment income
|
1
|
|
1
|
|
—
|
%
|
|
5
|
|
3
|
|
67
|
%
|
||||
Net realized capital gains
|
1
|
|
—
|
|
NM
|
|
|
3
|
|
(1
|
)
|
NM
|
|
||||
Total revenues
|
256
|
|
268
|
|
(4
|
%)
|
|
751
|
|
788
|
|
(5
|
%)
|
||||
Amortization of DAC
|
3
|
|
4
|
|
(25
|
%)
|
|
9
|
|
12
|
|
(25
|
%)
|
||||
Operating costs and other expenses
|
202
|
|
212
|
|
(5
|
%)
|
|
607
|
|
635
|
|
(4
|
%)
|
||||
Total benefits, losses and expenses
|
205
|
|
216
|
|
(5
|
%)
|
|
616
|
|
647
|
|
(5
|
%)
|
||||
Income before income taxes
|
51
|
|
52
|
|
(2
|
%)
|
|
135
|
|
141
|
|
(4
|
%)
|
||||
Income tax expense
|
11
|
|
11
|
|
—
|
%
|
|
27
|
|
29
|
|
(7
|
%)
|
||||
Net income
|
$
|
40
|
|
$
|
41
|
|
(2
|
%)
|
|
$
|
108
|
|
$
|
112
|
|
(4
|
%)
|
Daily average Hartford Funds AUM
|
$
|
119,738
|
|
$
|
119,897
|
|
—
|
%
|
|
$
|
116,635
|
|
$
|
118,098
|
|
(1
|
%)
|
ROA [1]
|
13.3
|
|
13.6
|
|
(2
|
%)
|
|
12.4
|
|
12.7
|
|
(2
|
%)
|
||||
Adjustment to reconcile ROA to ROA, core earnings:
|
|
|
|
|
|
|
|
||||||||||
Effect of net realized capital losses (gains) excluded from core earnings, before tax
|
(0.4
|
)
|
—
|
|
NM
|
|
|
(0.3
|
)
|
0.1
|
|
NM
|
|
||||
ROA, core earnings [1]
|
12.9
|
|
13.6
|
|
(5
|
%)
|
|
12.1
|
|
12.8
|
|
(5
|
%)
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||
|
2019
|
2018
|
Change
|
|
2019
|
2018
|
Change
|
||||||||||
Mutual Fund and ETP AUM - beginning of period
|
$
|
106,889
|
|
$
|
101,665
|
|
5
|
%
|
|
$
|
91,557
|
|
$
|
99,090
|
|
(8
|
%)
|
Sales - mutual fund
|
5,199
|
|
5,176
|
|
—
|
%
|
|
17,218
|
|
16,605
|
|
4
|
%
|
||||
Redemptions - mutual fund
|
(6,126
|
)
|
(5,192
|
)
|
(18
|
%)
|
|
(18,123
|
)
|
(15,892
|
)
|
(14
|
%)
|
||||
Net flows - ETP
|
127
|
|
261
|
|
(51
|
%)
|
|
874
|
|
683
|
|
28
|
%
|
||||
Net flows - mutual fund and ETP
|
(800
|
)
|
245
|
|
NM
|
|
|
(31
|
)
|
1,396
|
|
(102
|
%)
|
||||
Change in market value and other
|
(129
|
)
|
3,623
|
|
(104
|
%)
|
|
14,434
|
|
5,047
|
|
186
|
%
|
||||
Mutual fund and ETP AUM - end of period
|
105,960
|
|
105,533
|
|
—
|
%
|
|
105,960
|
|
105,533
|
|
—
|
%
|
||||
Talcott Resolution life and annuity separate account AUM [1]
|
14,021
|
|
15,543
|
|
(10
|
%)
|
|
14,021
|
|
15,543
|
|
(10
|
%)
|
||||
Hartford Funds AUM
|
$
|
119,981
|
|
$
|
121,076
|
|
(1
|
%)
|
|
$
|
119,981
|
|
$
|
121,076
|
|
(1
|
%)
|
|
September 30,
|
|||||||
|
2019
|
2018
|
Change
|
|||||
Equity
|
$
|
66,999
|
|
$
|
69,463
|
|
(4
|
%)
|
Fixed Income
|
15,685
|
|
14,831
|
|
6
|
%
|
||
Multi-Strategy Investments [1]
|
20,429
|
|
20,062
|
|
2
|
%
|
||
Exchange-traded Products
|
2,847
|
|
1,177
|
|
142
|
%
|
||
Mutual Fund and ETP AUM
|
$
|
105,960
|
|
$
|
105,533
|
|
—
|
%
|
CORPORATE
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||
|
2019
|
2018
|
Change
|
|
2019
|
2018
|
Change
|
||||||||||
Fee income
|
$
|
14
|
|
$
|
15
|
|
(7
|
%)
|
|
$
|
38
|
|
$
|
21
|
|
81
|
%
|
Other revenue
|
24
|
|
6
|
|
NM
|
|
|
68
|
|
8
|
|
NM
|
|
||||
Net investment income
|
10
|
|
15
|
|
(33
|
%)
|
|
51
|
|
33
|
|
55
|
%
|
||||
Net realized capital gains
|
1
|
|
4
|
|
(75
|
%)
|
|
21
|
|
9
|
|
133
|
%
|
||||
Total revenues
|
49
|
|
40
|
|
23
|
%
|
|
178
|
|
71
|
|
151
|
%
|
||||
Benefits, losses and loss adjustment expenses [1]
|
5
|
|
3
|
|
67
|
%
|
|
10
|
|
9
|
|
11
|
%
|
||||
Insurance operating costs and other expenses
|
20
|
|
25
|
|
(20
|
%)
|
|
66
|
|
59
|
|
12
|
%
|
||||
Loss on extinguishment of debt [2]
|
90
|
|
—
|
|
NM
|
|
|
90
|
|
6
|
|
NM
|
|
||||
Interest expense [2]
|
67
|
|
69
|
|
(3
|
%)
|
|
194
|
|
228
|
|
(15
|
%)
|
||||
Total benefits, losses and expenses
|
182
|
|
97
|
|
88
|
%
|
|
360
|
|
302
|
|
19
|
%
|
||||
Loss before income taxes
|
(133
|
)
|
(57
|
)
|
(133
|
%)
|
|
(182
|
)
|
(231
|
)
|
21
|
%
|
||||
Income tax benefit [3]
|
(34
|
)
|
(17
|
)
|
(100
|
%)
|
|
(40
|
)
|
(45
|
)
|
11
|
%
|
||||
Loss from continuing operations, net of tax
|
(99
|
)
|
(40
|
)
|
(148
|
%)
|
|
(142
|
)
|
(186
|
)
|
24
|
%
|
||||
Income from discontinued operations, net of tax
|
—
|
|
5
|
|
(100
|
%)
|
|
—
|
|
322
|
|
(100
|
%)
|
||||
Net income (loss)
|
(99
|
)
|
(35
|
)
|
(183
|
%)
|
|
(142
|
)
|
136
|
|
NM
|
|
||||
Preferred stock dividends
|
11
|
|
—
|
|
NM
|
|
|
16
|
|
—
|
|
NM
|
|
||||
Net income (loss) available to common stockholders
|
$
|
(110
|
)
|
$
|
(35
|
)
|
NM
|
|
|
$
|
(158
|
)
|
$
|
136
|
|
NM
|
|
[1]
|
Represents benefits expense on life and annuity business previously underwritten by the Company.
|
[2]
|
For discussion of debt, see Note 10 - Debt of Notes to Condensed Consolidated Financial Statements and Note 13- Debt of Notes to Consolidated Financial Statement in The Hartford's 2018 Form 10-K Annual Report.
|
[3]
|
For discussion of income taxes, see Note 11 - Income Taxes of Notes to the Condensed Consolidated Financial Statements.
|
|
•
|
risk identification and assessment;
|
•
|
the development of risk appetites, tolerances, and limits;
|
•
|
risk monitoring; and
|
•
|
internal and external risk reporting.
|
|
Portion of losses reinsured
|
Portion of losses retained by The Hartford
|
Per Occurrence Property Catastrophe Treaty for all catastrophe events from 1/1/2019 to 12/31/2019 [2]
|
|
|
Losses of $0 to $350 from one event
|
None
|
100% retained
|
Losses of $350 to $500 from one event
|
75% of $150 in excess of $350
|
25% co-participation
|
Losses of $500 to $1.1 billion from one event [3]
|
90% of $600 in excess of $500
|
10% co-participation
|
Additional Per Occurrence Property Catastrophe Treaty for catastrophes from 3/1/2019 to 12/31/2019 other than named storms and earthquake events [2] [6]
|
|
|
Losses of $0 to $150 from one event
|
None
|
100% retained
|
Losses of $150 to $350 from one event
|
80% of $200 in excess of $150
|
20% co-participation
|
Aggregate Property Catastrophe Treaty for 1/1/2019 to 12/31/2019 [4]
|
|
|
$0 to $775 of aggregate losses
|
None
|
100% retained
|
$775 to $1.0 billion of aggregate losses
|
100%
|
None
|
Workers' Compensation Catastrophe Treaty for 1/1/2019 to 12/31/2019
|
|
|
Losses of $0 to $100 from one event
|
None
|
100% retained
|
Losses of $100 to $450 from one event [5]
|
80% of $350 in excess of $100
|
20% co-participation
|
[1]
|
Navigators Group catastrophe exposures are not covered by these treaties. For 2019, Navigators Group treaties in-force at the time of the acquisition remain in-force. For additional information on business acquisitions see Note 2 - Business Acquisition in Notes to Condensed Consolidated Financial Statements.
|
[2]
|
In addition to the Property Occurrence Treaty and Additional Property Occurrence Treaty for Florida events, The Hartford has purchased the mandatory FHCF reinsurance for the period from 6/1/2019 to 5/30/2020. Retention and coverage varies by writing company. The writing company with the largest coverage under FHCF is Hartford Insurance Company of the Midwest, with coverage for approximately $84 of per event losses in excess of a $29 retention.
|
[3]
|
Portions of this layer of coverage extend beyond the traditional one year term.
|
[4]
|
The aggregate treaty is not limited to a single event; rather, it is designed to provide reinsurance protection for the aggregate of all events designated as catastrophes by PCS (Property Claims Services/Verisk) with a $350 limit on any one event. All catastrophe losses apply toward satisfying the $775 attachment point under the aggregate treaty regardless of whether a portion of per event losses up to $350 are recovered under the Additional Per Occurrence Property Catastrophe Treaty.
|
[5]
|
In addition to the limits shown, the workers' compensation reinsurance includes a non-catastrophe, industrial accident layer, providing coverage for 80% of $30 in per event losses in excess of a $20 retention.
|
[6]
|
The Additional Per Occurrence Property Catastrophe Treaty covers losses from catastrophe events other than from named hurricanes, tropical storms and earthquakes.
|
|
As of September 30, 2019
|
As of December 31, 2018
|
||||
Paid loss and loss adjustment expenses
|
$
|
236
|
|
$
|
127
|
|
Unpaid loss and loss adjustment expenses
|
4,678
|
|
3,773
|
|
||
Gross reinsurance recoverables
|
4,914
|
|
3,900
|
|
||
Allowance for uncollectible reinsurance
|
(148
|
)
|
(126
|
)
|
||
Net reinsurance recoverables
|
$
|
4,766
|
|
$
|
3,774
|
|
|
As of September 30, 2019
|
As of December 31, 2018
|
||||
Paid loss and loss adjustment expenses
|
$
|
13
|
|
$
|
12
|
|
Unpaid loss and loss adjustment expenses
|
231
|
|
239
|
|
||
Gross reinsurance recoverables
|
244
|
|
251
|
|
||
Allowance for uncollectible reinsurance [1]
|
—
|
|
—
|
|
||
Net reinsurance recoverables
|
$
|
244
|
|
$
|
251
|
|
•
|
Investing in a portfolio of high-quality and diverse securities;
|
•
|
Selling investments subject to credit risk;
|
•
|
Hedging through use of 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.
|
Fixed Maturities by Credit Quality
|
|||||||||||||||||
|
September 30, 2019
|
|
December 31, 2018
|
||||||||||||||
|
Amortized Cost
|
Fair Value
|
Percent of Total Fair Value
|
|
Amortized Cost
|
Fair Value
|
Percent of Total Fair Value
|
||||||||||
United States Government/Government agencies
|
$
|
5,362
|
|
$
|
5,588
|
|
13.2
|
%
|
|
$
|
4,446
|
|
$
|
4,430
|
|
12.4
|
%
|
AAA
|
6,124
|
|
6,360
|
|
15.0
|
%
|
|
6,366
|
|
6,440
|
|
18.1
|
%
|
||||
AA
|
7,762
|
|
8,202
|
|
19.4
|
%
|
|
6,861
|
|
6,985
|
|
19.6
|
%
|
||||
A
|
10,161
|
|
10,894
|
|
25.7
|
%
|
|
8,314
|
|
8,370
|
|
23.5
|
%
|
||||
BBB
|
9,303
|
|
9,850
|
|
23.2
|
%
|
|
8,335
|
|
8,163
|
|
22.9
|
%
|
||||
BB & below
|
1,462
|
|
1,495
|
|
3.5
|
%
|
|
1,281
|
|
1,264
|
|
3.5
|
%
|
||||
Total fixed maturities, AFS
|
$
|
40,174
|
|
$
|
42,389
|
|
100.0
|
%
|
|
$
|
35,603
|
|
$
|
35,652
|
|
100.0
|
%
|
Securities by Type
|
|||||||||||||||||||||||||||||
|
September 30, 2019
|
|
December 31, 2018
|
||||||||||||||||||||||||||
|
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
|
$
|
1,187
|
|
$
|
20
|
|
$
|
(1
|
)
|
$
|
1,206
|
|
2.8
|
%
|
|
$
|
1,159
|
|
$
|
5
|
|
$
|
(1
|
)
|
$
|
1,163
|
|
3.3
|
%
|
Other
|
128
|
|
3
|
|
—
|
|
131
|
|
0.3
|
%
|
|
113
|
|
—
|
|
—
|
|
113
|
|
0.3
|
%
|
||||||||
Collateralized loan obligations ("CLOs")
|
2,162
|
|
4
|
|
(8
|
)
|
2,158
|
|
5.1
|
%
|
|
1,455
|
|
2
|
|
(20
|
)
|
1,437
|
|
4.0
|
%
|
||||||||
CMBS
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Agency [1]
|
1,828
|
|
63
|
|
(4
|
)
|
1,887
|
|
4.5
|
%
|
|
1,447
|
|
13
|
|
(33
|
)
|
1,427
|
|
4.0
|
%
|
||||||||
Bonds
|
2,002
|
|
115
|
|
—
|
|
2,117
|
|
5.0
|
%
|
|
1,845
|
|
13
|
|
(29
|
)
|
1,829
|
|
5.1
|
%
|
||||||||
Interest only
|
237
|
|
15
|
|
(2
|
)
|
250
|
|
0.6
|
%
|
|
289
|
|
9
|
|
(2
|
)
|
296
|
|
0.8
|
%
|
||||||||
Corporate
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Basic industry
|
666
|
|
35
|
|
(1
|
)
|
700
|
|
1.7
|
%
|
|
604
|
|
8
|
|
(21
|
)
|
591
|
|
1.7
|
%
|
||||||||
Capital goods
|
1,449
|
|
72
|
|
(3
|
)
|
1,518
|
|
3.6
|
%
|
|
1,132
|
|
8
|
|
(31
|
)
|
1,109
|
|
3.1
|
%
|
||||||||
Consumer cyclical
|
1,108
|
|
57
|
|
(2
|
)
|
1,163
|
|
2.7
|
%
|
|
943
|
|
9
|
|
(29
|
)
|
923
|
|
2.6
|
%
|
||||||||
Consumer non-cyclical
|
2,355
|
|
131
|
|
(3
|
)
|
2,483
|
|
5.9
|
%
|
|
1,936
|
|
11
|
|
(71
|
)
|
1,876
|
|
5.3
|
%
|
||||||||
Energy
|
1,480
|
|
88
|
|
(4
|
)
|
1,564
|
|
3.7
|
%
|
|
1,156
|
|
14
|
|
(43
|
)
|
1,127
|
|
3.1
|
%
|
||||||||
Financial services
|
4,045
|
|
178
|
|
(18
|
)
|
4,205
|
|
9.9
|
%
|
|
3,368
|
|
17
|
|
(99
|
)
|
3,286
|
|
9.2
|
%
|
||||||||
Tech./comm.
|
2,523
|
|
203
|
|
(1
|
)
|
2,725
|
|
6.4
|
%
|
|
1,720
|
|
34
|
|
(54
|
)
|
1,700
|
|
4.8
|
%
|
||||||||
Transportation
|
771
|
|
45
|
|
(1
|
)
|
815
|
|
1.9
|
%
|
|
548
|
|
4
|
|
(18
|
)
|
534
|
|
1.5
|
%
|
||||||||
Utilities
|
2,105
|
|
146
|
|
(3
|
)
|
2,248
|
|
5.3
|
%
|
|
2,017
|
|
43
|
|
(69
|
)
|
1,991
|
|
5.6
|
%
|
||||||||
Other
|
365
|
|
15
|
|
—
|
|
380
|
|
0.9
|
%
|
|
272
|
|
—
|
|
(11
|
)
|
261
|
|
0.7
|
%
|
||||||||
Foreign govt./govt. agencies
|
1,053
|
|
65
|
|
(1
|
)
|
1,117
|
|
2.6
|
%
|
|
866
|
|
7
|
|
(26
|
)
|
847
|
|
2.4
|
%
|
||||||||
Municipal bonds
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Taxable
|
764
|
|
65
|
|
—
|
|
829
|
|
2.0
|
%
|
|
629
|
|
14
|
|
(17
|
)
|
626
|
|
1.8
|
%
|
||||||||
Tax-exempt
|
8,331
|
|
736
|
|
(1
|
)
|
9,066
|
|
21.4
|
%
|
|
9,343
|
|
407
|
|
(30
|
)
|
9,720
|
|
27.3
|
%
|
||||||||
RMBS
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Agency
|
2,545
|
|
61
|
|
—
|
|
2,606
|
|
6.1
|
%
|
|
1,508
|
|
7
|
|
(29
|
)
|
1,486
|
|
4.2
|
%
|
||||||||
Non-agency
|
1,448
|
|
21
|
|
(1
|
)
|
1,468
|
|
3.5
|
%
|
|
933
|
|
5
|
|
(6
|
)
|
932
|
|
2.6
|
%
|
||||||||
Alt-A
|
42
|
|
3
|
|
—
|
|
45
|
|
0.1
|
%
|
|
43
|
|
4
|
|
—
|
|
47
|
|
0.1
|
%
|
||||||||
Sub-prime
|
591
|
|
22
|
|
—
|
|
613
|
|
1.4
|
%
|
|
786
|
|
28
|
|
—
|
|
814
|
|
2.3
|
%
|
||||||||
U.S. Treasuries
|
989
|
|
106
|
|
—
|
|
1,095
|
|
2.6
|
%
|
|
1,491
|
|
41
|
|
(15
|
)
|
1,517
|
|
4.2
|
%
|
||||||||
Total fixed maturities, AFS
|
$
|
40,174
|
|
$
|
2,269
|
|
$
|
(54
|
)
|
$
|
42,389
|
|
100.0
|
%
|
|
$
|
35,603
|
|
$
|
703
|
|
$
|
(654
|
)
|
$
|
35,652
|
|
100.0
|
%
|
Fixed maturities, FVO
|
|
|
|
$
|
39
|
|
|
|
|
|
|
$
|
22
|
|
|
||||||||||||||
Equity securities, at fair value
|
|
|
|
$
|
1,414
|
|
|
|
|
|
|
$
|
1,214
|
|
|
[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.
|
Exposure to CMBS & RMBS Bonds as of September 30, 2019
|
||||||||||||||||||||||||||||||||||||
|
AAA
|
AA
|
A
|
BBB
|
BB and Below
|
Total
|
||||||||||||||||||||||||||||||
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
||||||||||||||||||||||||
CMBS
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Agency [1]
|
$
|
1,828
|
|
$
|
1,887
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,828
|
|
$
|
1,887
|
|
Bonds
|
1,031
|
|
1,085
|
|
475
|
|
500
|
|
402
|
|
432
|
|
94
|
|
100
|
|
—
|
|
—
|
|
2,002
|
|
2,117
|
|
||||||||||||
Interest Only
|
159
|
|
168
|
|
70
|
|
75
|
|
1
|
|
1
|
|
5
|
|
5
|
|
2
|
|
1
|
|
237
|
|
250
|
|
||||||||||||
Total CMBS
|
3,018
|
|
3,140
|
|
545
|
|
575
|
|
403
|
|
433
|
|
99
|
|
105
|
|
2
|
|
1
|
|
4,067
|
|
4,254
|
|
||||||||||||
RMBS
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Agency
|
2,521
|
|
2,581
|
|
24
|
|
25
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2,545
|
|
2,606
|
|
||||||||||||
Non-Agency
|
982
|
|
996
|
|
264
|
|
269
|
|
172
|
|
173
|
|
29
|
|
29
|
|
1
|
|
1
|
|
1,448
|
|
1,468
|
|
||||||||||||
Alt-A
|
—
|
|
—
|
|
9
|
|
9
|
|
4
|
|
4
|
|
9
|
|
9
|
|
20
|
|
23
|
|
42
|
|
45
|
|
||||||||||||
Sub-Prime
|
13
|
|
13
|
|
50
|
|
50
|
|
189
|
|
195
|
|
177
|
|
185
|
|
162
|
|
170
|
|
591
|
|
613
|
|
||||||||||||
Total RMBS
|
3,516
|
|
3,590
|
|
347
|
|
353
|
|
365
|
|
372
|
|
215
|
|
223
|
|
183
|
|
194
|
|
4,626
|
|
4,732
|
|
||||||||||||
Total CMBS & RMBS
|
$
|
6,534
|
|
$
|
6,730
|
|
$
|
892
|
|
$
|
928
|
|
$
|
768
|
|
$
|
805
|
|
$
|
314
|
|
$
|
328
|
|
$
|
185
|
|
$
|
195
|
|
$
|
8,693
|
|
$
|
8,986
|
|
Exposure to CMBS & RMBS Bonds as of December 31, 2018
|
||||||||||||||||||||||||||||||||||||
|
AAA
|
AA
|
A
|
BBB
|
BB and Below
|
Total
|
||||||||||||||||||||||||||||||
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
||||||||||||||||||||||||
CMBS
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Agency [1]
|
$
|
1,447
|
|
$
|
1,427
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,447
|
|
$
|
1,427
|
|
Bonds
|
983
|
|
973
|
|
444
|
|
436
|
|
368
|
|
370
|
|
50
|
|
50
|
|
—
|
|
—
|
|
1,845
|
|
1,829
|
|
||||||||||||
Interest Only
|
204
|
|
210
|
|
77
|
|
79
|
|
1
|
|
1
|
|
5
|
|
4
|
|
2
|
|
2
|
|
289
|
|
296
|
|
||||||||||||
Total CMBS
|
2,634
|
|
2,610
|
|
521
|
|
515
|
|
369
|
|
371
|
|
55
|
|
54
|
|
2
|
|
2
|
|
3,581
|
|
3,552
|
|
||||||||||||
RMBS
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Agency
|
1,508
|
|
1,486
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,508
|
|
1,486
|
|
||||||||||||
Non-Agency
|
611
|
|
610
|
|
167
|
|
167
|
|
111
|
|
109
|
|
33
|
|
33
|
|
11
|
|
13
|
|
933
|
|
932
|
|
||||||||||||
Alt-A
|
—
|
|
—
|
|
10
|
|
10
|
|
4
|
|
5
|
|
9
|
|
9
|
|
20
|
|
23
|
|
43
|
|
47
|
|
||||||||||||
Sub-Prime
|
31
|
|
32
|
|
72
|
|
73
|
|
211
|
|
217
|
|
179
|
|
186
|
|
293
|
|
306
|
|
786
|
|
814
|
|
||||||||||||
Total RMBS
|
2,150
|
|
2,128
|
|
249
|
|
250
|
|
326
|
|
331
|
|
221
|
|
228
|
|
324
|
|
342
|
|
3,270
|
|
3,279
|
|
||||||||||||
Total CMBS & RMBS
|
$
|
4,784
|
|
$
|
4,738
|
|
$
|
770
|
|
$
|
765
|
|
$
|
695
|
|
$
|
702
|
|
$
|
276
|
|
$
|
282
|
|
$
|
326
|
|
$
|
344
|
|
$
|
6,851
|
|
$
|
6,831
|
|
[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.
|
Available For Sale Investments in Municipal Bonds
|
|||||||||||||||
|
September 30, 2019
|
|
December 31, 2018
|
||||||||||||
|
Amortized Cost
|
Fair Value
|
Weighted Average Credit Quality
|
|
Amortized Cost
|
Fair Value
|
Weighted Average Credit Quality
|
||||||||
General Obligation
|
$
|
1,177
|
|
$
|
1,297
|
|
AA
|
|
$
|
1,222
|
|
$
|
1,275
|
|
AA
|
Pre-Refunded [1]
|
901
|
|
945
|
|
AAA
|
|
1,845
|
|
1,904
|
|
AAA
|
||||
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
||||
Transportation
|
1,601
|
|
1,779
|
|
A+
|
|
1,449
|
|
1,537
|
|
A+
|
||||
Health Care
|
1,395
|
|
1,508
|
|
AA-
|
|
1,270
|
|
1,304
|
|
AA-
|
||||
Education
|
816
|
|
891
|
|
AA
|
|
941
|
|
953
|
|
AA
|
||||
Leasing [2]
|
779
|
|
846
|
|
AA-
|
|
772
|
|
799
|
|
AA-
|
||||
Water & Sewer
|
762
|
|
809
|
|
AA
|
|
816
|
|
847
|
|
AA
|
||||
Sales Tax
|
483
|
|
547
|
|
AA
|
|
507
|
|
541
|
|
AA
|
||||
Power
|
336
|
|
373
|
|
A
|
|
308
|
|
328
|
|
A+
|
||||
Housing
|
83
|
|
85
|
|
AA+
|
|
33
|
|
35
|
|
A+
|
||||
Other
|
762
|
|
815
|
|
AA-
|
|
809
|
|
823
|
|
AA-
|
||||
Total Revenue
|
7,017
|
|
7,653
|
|
AA-
|
|
6,905
|
|
7,167
|
|
AA-
|
||||
Total Municipal
|
$
|
9,095
|
|
$
|
9,895
|
|
AA-
|
|
$
|
9,972
|
|
$
|
10,346
|
|
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
|
|||||||||||
|
September 30, 2019
|
|
December 31, 2018
|
||||||||
|
Amount
|
Percent
|
|
Amount
|
Percent
|
||||||
Hedge funds
|
$
|
76
|
|
4.3
|
%
|
|
$
|
51
|
|
3.0
|
%
|
Real estate funds
|
450
|
|
25.4
|
%
|
|
499
|
|
29.0
|
%
|
||
Private equity and other funds
|
842
|
|
47.6
|
%
|
|
788
|
|
45.7
|
%
|
||
Other alternative investments [1]
|
402
|
|
22.7
|
%
|
|
385
|
|
22.3
|
%
|
||
Total
|
$
|
1,770
|
|
100.0
|
%
|
|
$
|
1,723
|
|
100.0
|
%
|
Unrealized Loss Aging for AFS Securities
|
|||||||||||||||||||||||
|
September 30, 2019
|
|
December 31, 2018
|
||||||||||||||||||||
Consecutive Months
|
Items
|
Cost or Amortized Cost
|
Fair Value
|
Unrealized Loss
|
|
Items
|
Cost or Amortized Cost
|
Fair Value
|
Unrealized Loss
|
||||||||||||||
Three months or less
|
248
|
|
$
|
1,716
|
|
$
|
1,704
|
|
$
|
(12
|
)
|
|
468
|
|
$
|
3,191
|
|
$
|
3,153
|
|
$
|
(38
|
)
|
Greater than three to six months
|
79
|
|
298
|
|
295
|
|
(3
|
)
|
|
359
|
|
2,530
|
|
2,487
|
|
(43
|
)
|
||||||
Greater than six to nine months
|
18
|
|
26
|
|
25
|
|
(1
|
)
|
|
347
|
|
2,243
|
|
2,186
|
|
(57
|
)
|
||||||
Greater than nine to eleven months
|
60
|
|
620
|
|
616
|
|
(4
|
)
|
|
817
|
|
5,921
|
|
5,688
|
|
(233
|
)
|
||||||
Twelve months or more
|
376
|
|
1,195
|
|
1,161
|
|
(34
|
)
|
|
969
|
|
5,272
|
|
4,989
|
|
(283
|
)
|
||||||
Total
|
781
|
|
$
|
3,855
|
|
$
|
3,801
|
|
$
|
(54
|
)
|
|
2,960
|
|
$
|
19,157
|
|
$
|
18,503
|
|
$
|
(654
|
)
|
Unrealized Loss Aging for AFS Securities Continuously Depressed Over 20%
|
|||||||||||||||||||||||
|
September 30, 2019
|
|
December 31, 2018
|
||||||||||||||||||||
Consecutive Months
|
Items
|
Cost or Amortized Cost
|
Fair Value
|
Unrealized Loss
|
|
Items
|
Cost or Amortized Cost
|
Fair Value
|
Unrealized Loss
|
||||||||||||||
Three months or less
|
8
|
|
$
|
49
|
|
$
|
38
|
|
$
|
(11
|
)
|
|
13
|
|
$
|
59
|
|
$
|
43
|
|
$
|
(16
|
)
|
Greater than three to six months
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||||
Greater than six to nine months
|
—
|
|
—
|
|
—
|
|
—
|
|
|
3
|
|
3
|
|
2
|
|
(1
|
)
|
||||||
Greater than nine to eleven months
|
—
|
|
—
|
|
—
|
|
—
|
|
|
2
|
|
2
|
|
1
|
|
(1
|
)
|
||||||
Twelve months or more
|
31
|
|
10
|
|
6
|
|
(4
|
)
|
|
36
|
|
13
|
|
8
|
|
(5
|
)
|
||||||
Total
|
39
|
|
$
|
59
|
|
$
|
44
|
|
$
|
(15
|
)
|
|
54
|
|
$
|
77
|
|
$
|
54
|
|
$
|
(23
|
)
|
Other-than-temporary Impairments Recognized in Earnings by Security Type
|
|||||||||||||
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||
|
2019
|
2018
|
|
2019
|
2018
|
||||||||
Credit Impairments
|
|
|
|
|
|
||||||||
CMBS
|
$
|
—
|
|
$
|
1
|
|
|
$
|
—
|
|
$
|
1
|
|
Corporate
|
$
|
1
|
|
$
|
—
|
|
|
$
|
3
|
|
$
|
—
|
|
Total
|
$
|
1
|
|
$
|
1
|
|
|
$
|
3
|
|
$
|
1
|
|
|
|
•
|
$1.3 billion in fixed maturities, short-term investments, and cash at The Hartford Financial Services Group, Inc, ("HFSG Holding Company") .
|
•
|
A senior unsecured five-year revolving credit facility that provides for borrowing capacity up to $750 of unsecured credit through March 29, 2023. No borrowings were outstanding as of September 30, 2019.
|
•
|
Borrowings available under a commercial paper program to a maximum of $750. As of September 30, 2019 there was no commercial paper outstanding.
|
•
|
An intercompany liquidity agreement that allows for short-term advances of funds among the HFSG Holding Company and certain affiliates of up to $2.0 billion for liquidity and other general corporate purposes.
|
|
•
|
P&C - The Company has not and does not anticipate receiving net dividends from its property and casualty insurance subsidiaries in 2019.
|
•
|
Group Benefits - The Company received $225 in dividends from Hartford Life and Accident Insurance Company ("HLA") through the first nine months of 2019, and anticipates receiving an additional $75 in dividends over the remainder of 2019.
|
•
|
Hartford Funds - The Company received $84 in dividends from Hartford Funds through the first nine months of 2019 and expects to receive an additional $32 in dividends from Hartford Funds over the remainder of 2019.
|
|
•
|
$500 maturing debt payment in March of 2020.
|
•
|
$240 of interest on debt.
|
•
|
$21 dividends on preferred stock, subject to the discretion of the Board of Directors.
|
•
|
$440 of common stockholders' dividends, subject to the discretion of the Board of Directors and before share repurchases and any changes in common stockholder dividend rate.
|
•
|
Approximately $30 cash capital contribution to its Lloyd's corporate member in November 2019.
|
|
•
|
Authorization for equity repurchases of up to $1.0 billion effective through December 31, 2020. Under the program the company repurchased 1.6 million shares during the period from January 1, 2019 to September 30, 2019 for $90 with $910 of authorization remaining as of September 30, 2019. During the period from October 1, 2019 to November 1, 2019, the Company repurchased approximately 0.6 million common shares for $36 with $874 of authorization remaining as of November 1, 2019.
|
|
Declared
|
Record
|
Payable
|
Amount per share
|
||
July 18, 2019
|
September 3, 2019
|
October 1, 2019
|
$
|
0.30
|
|
October 23, 2019
|
December 2, 2019
|
January 2, 2020
|
$
|
0.30
|
|
Declared
|
Record
|
Payable
|
Amount per share
|
||
July 18, 2019
|
August 1, 2019
|
August 15, 2019
|
$
|
375.00
|
|
September 12, 2019
|
November 1, 2019
|
November 15, 2019
|
$
|
375.00
|
|
October 23, 2019
|
February 1, 2020
|
February 18, 2020
|
$
|
375.00
|
|
Capital Structure
|
||||||||
|
September 30, 2019
|
December 31, 2018
|
Change
|
|||||
Short-term debt (includes current maturities of long-term debt)
|
$
|
500
|
|
$
|
413
|
|
21
|
%
|
Long-term debt
|
4,346
|
|
4,265
|
|
2
|
%
|
||
Total debt
|
4,846
|
|
4,678
|
|
4
|
%
|
||
Common stockholders' equity excluding AOCI, net of tax
|
15,530
|
|
14,346
|
|
8
|
%
|
||
Preferred stock
|
334
|
|
334
|
|
—
|
%
|
||
AOCI, net of tax
|
214
|
|
(1,579
|
)
|
114
|
%
|
||
Total stockholders’ equity
|
16,078
|
|
13,101
|
|
23
|
%
|
||
Total capitalization
|
$
|
20,924
|
|
$
|
17,779
|
|
18
|
%
|
Debt to stockholders’ equity
|
30
|
%
|
36
|
%
|
|
|||
Debt to capitalization
|
23
|
%
|
26
|
%
|
|
|
Nine Months Ended September 30,
|
|||||
|
2019
|
2018
|
||||
Net cash provided by operating activities
|
$
|
2,446
|
|
$
|
1,842
|
|
Net cash used for investing activities
|
$
|
(1,320
|
)
|
$
|
(762
|
)
|
Net cash used for financing activities
|
$
|
(943
|
)
|
$
|
(1,691
|
)
|
Cash and restricted cash– end of period
|
$
|
290
|
|
$
|
102
|
|
U.S. Statutory Capital Rollforward for the Company's Insurance Subsidiaries
|
|||||||||
|
Property and Casualty Insurance Subsidiaries [1] [2]
|
Group Benefits Insurance Subsidiary
|
Total
|
||||||
U.S statutory capital at January 1, 2019
|
$
|
8,440
|
|
$
|
2,407
|
|
$
|
10,847
|
|
Statutory income
|
1,046
|
|
359
|
|
1,405
|
|
|||
Dividends to parent
|
(14
|
)
|
(225
|
)
|
(239
|
)
|
|||
Other items
|
284
|
|
25
|
|
309
|
|
|||
Net change to U.S. statutory capital
|
1,316
|
|
159
|
|
1,475
|
|
|||
U.S statutory capital at September 30, 2019
|
$
|
9,756
|
|
$
|
2,566
|
|
$
|
12,322
|
|
[1]
|
The statutory capital for property and casualty insurance subsidiaries in this table does not include the value of an intercompany note owed by Hartford Holdings, Inc. to Hartford Fire Insurance Company.
|
[2]
|
Excludes insurance operations in the U.K. and continental Europe. Though the business was not acquired until May 23, 2019, this table includes statutory capital and surplus of Navigators U.S. insurance subsidiaries as of both January 1, 2019 and September 30, 2019.
|
See Exhibits Index on page
|
111.
|
|
|
The Hartford Financial Services Group, Inc.
|
||
|
|
(Registrant)
|
||
|
|
|||
Date:
|
November 4, 2019
|
/s/ Scott R. Lewis
|
||
|
|
Scott R. Lewis
|
||
|
|
Senior Vice President and Controller
|
||
|
|
(Chief accounting officer and duly
authorized signatory)
|
1.
|
Subsection (C)(i) of Section 3.1 of the Plan titled “Receipt of Hardship Withdrawal under the Qualified Plan” and which reads as follows is hereby deleted:
|
2.
|
Subsection (C)(ii) of Section 3.1 of the Plan titled “Partial Ineligibility of Certain Members” shall be renumbered Subsection (C)(i).
|
Date:
|
November 4, 2019
|
/s/ Martha Gervasi
|
|
|
Martha Gervasi
|
|
|
Executive Vice President & Chief Human Resources Officer
|
|
|
|
|
Form S-3 Registration No.
|
|
|
Form S-8 Registration Nos.
|
|
|
|
|
333-231592
|
|
|
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:
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November 4, 2019
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/s/ Christopher J. Swift
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Christopher J. Swift
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Chief Executive Officer
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1.
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I have reviewed this Quarterly Report on Form 10-Q of The Hartford Financial Services Group, Inc.;
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2.
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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;
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3.
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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;
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4.
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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:
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a.
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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;
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b.
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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;
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c.
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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
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d.
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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
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5.
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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):
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a.
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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
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b.
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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.
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Date:
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November 4, 2019
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/s/ Beth A. Costello
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|
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Beth A. Costello
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Executive Vice President and Chief Financial Officer
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1)
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The Report fully complies with the requirements of section 13(a) or section 15(d) of the Securities Exchange Act of 1934; and
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2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date:
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November 4, 2019
|
/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
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2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date:
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November 4, 2019
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/s/ Beth A Costello
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Beth A Costello
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Executive Vice President and Chief Financial Officer
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