HARTFORD FINANCIAL SERVICES GROUP, INC. [HIG-PG] Filings

10-Q 1 hig-20240630.htm 10-Q hig-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________

FORM 10-Q

____________________________________

(Mark One)


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

For the quarterly period ended June 30, 2024


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

For the transition period from ____________ to ______________

Commission file number 001-13958

____________________________________

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

(Exact name of registrant as specified in its charter)


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

One Hartford Plaza, Hartford, Connecticut 06155

(Address of principal executive offices) (Zip Code)

(860) 547-5000

(Registrant’s telephone number, including area code)

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


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

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

Indicate by check mark:

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

Yes

☑

☐

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

Yes

☑

☐

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

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

•

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

☐

•

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

Yes

☐

☑

As of July 24, 2024, there were outstanding 293,014,422 shares of Common Stock, $0.01 par value per share, of the registrant.

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024

TABLE OF CONTENTS


Item	Description	Page
	PART I. FINANCIAL INFORMATION
1.	FINANCIAL STATEMENTS
	REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	6
	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023	7
	CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023	8
	CONDENSED CONSOLIDATED BALANCE SHEETS - AS OF JUNE 30, 2024 AND DECEMBER 31, 2023	9
	CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023	10
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - FOR THE SIX MONTHS ENDED JUNE 30, 2024 AND 2023	11
	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	12
	NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES	12
	NOTE 2 - EARNINGS PER COMMON SHARE	12
	NOTE 3 - SEGMENT INFORMATION	13
	NOTE 4 - FAIR VALUE MEASUREMENTS	15
	NOTE 5 - INVESTMENTS	24
	NOTE 6 - DERIVATIVES	31
	NOTE 7 - PREMIUMS RECEIVABLE AND AGENTS' BALANCES	36
	NOTE 8 - REINSURANCE	37
	NOTE 9 - RESERVE FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES	39
	NOTE 10 - RESERVE FOR FUTURE POLICY BENEFITS	43
	NOTE 11 - OTHER POLICYHOLDER FUNDS AND BENEFITS PAYABLE	44
	NOTE 12 - INCOME TAXES	45
	NOTE 13 - COMMITMENTS AND CONTINGENCIES	45
	NOTE 14 - EQUITY	48
	NOTE 15 - CHANGES IN AND RECLASSIFICATIONS FROM ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)	48
	NOTE 16 - EMPLOYEE BENEFIT PLANS	51
	NOTE 17 - RESTRUCTURING AND OTHER COSTS	51
2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	52
3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	[a]
4.	CONTROLS AND PROCEDURES	109
	PART II. OTHER INFORMATION
1.	LEGAL PROCEEDINGS	110
1A.	RISK FACTORS	110
2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	110
5..	OTHER INFORMATION	110
6.	EXHIBITS	111

	SIGNATURE	112

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

Forward-looking Statements

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

Forward-looking statements are based on management's current expectations and assumptions regarding future economic, competitive, legislative and other developments and their potential effect upon The Hartford Financial Services Group, Inc. and its subsidiaries (collectively, the "Company" or "The Hartford"). Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual results could differ materially from expectations depending on the evolution of various factors, including the risks and uncertainties identified below, as well as factors described in such forward-looking statements, the Risk Factors of The Hartford's 2023 Form 10-K Annual Report, and our other filings with the Securities and Exchange Commission.

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

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

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

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

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

•Insurance Industry and Product-Related Risks:

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

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

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

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

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

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

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

◦technological changes, including usage-based methods of determining premiums, advancements in certain emerging technologies, including machine learning, predictive analytics, “big data” analysis or other artificial intelligence functions, advancements in automotive safety features, the development of autonomous vehicles, and platforms that facilitate ride sharing;

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

◦the uncertain effects of emerging claim and coverage issues;

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

◦the ongoing effects of COVID-19, including exposure to COVID-19 business interruption property claims and the possibility of a resurgence of COVID-19 related losses in Group Benefits;

•Financial Strength, Credit and Counterparty Risks:

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

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

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

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

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

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

•Risks Relating to Estimates, Assumptions and Valuations:

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

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

◦the potential for impairments of our goodwill;

•Strategic and Operational Risks:

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

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

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

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

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

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

•Regulatory and Legal Risks:

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

◦unfavorable judicial or legislative developments;

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

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

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

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


Table of Contents

Part I - Item 1. Financial Statements

Item 1.

FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

The Hartford Financial Services Group, Inc.

Hartford, Connecticut

Results of Review of Interim Financial Information

We have reviewed the accompanying condensed consolidated balance sheet of The Hartford Financial Services Group, Inc. and subsidiaries (the "Company") as of June 30, 2024, the related condensed consolidated statements of operations, comprehensive income, and changes in stockholders' equity for the three-month and six-month periods ended June 30, 2024 and 2023, and of cash flows for the six-month periods ended June 30, 2024 and 2023, and the related notes (collectively referred to as the "interim financial information"). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2023, and the related consolidated statements of operations, comprehensive income (loss), changes in stockholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated February 23, 2024, we expressed an unqualified opinion on those consolidated financial statements and included an explanatory paragraph regarding a change in accounting principle for the measurement and disclosure of long-duration contracts issued by insurance companies. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2023, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

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

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

/s/ Deloitte & Touche LLP

Hartford, Connecticut

July 25, 2024


Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

Condensed Consolidated Statements of Operations


	Three Months Ended June 30,				Six Months Ended June 30,
(in millions, except for per share data)	2024		2023		2024		2023
	(Unaudited)
Revenues
Earned premiums	$	5,578	$	5,220	$	11,024	$	10,283
Fee income	339		328		672		647
Net investment income	602		540		1,195		1,055
Net realized losses	(59)		(64)		(31)		(71)
Other revenues	26		25		45		45
Total revenues	6,486		6,049		12,905		11,959
Benefits, losses and expenses
Benefits, losses and loss adjustment expenses	3,661		3,580		7,272		7,062
Amortization of deferred policy acquisition costs ("DAC")	561		502		1,106		993
Insurance operating costs and other expenses	1,285		1,225		2,568		2,441



Interest expense	50		50		100		100
Amortization of other intangible assets	17		17		35		35
Restructuring and other costs	—		3		1		3
Total benefits, losses and expenses	5,574		5,377		11,082		10,634
Income before income taxes	912		672		1,823		1,325
Income tax expense	174		125		332		243


Net income	738		547		1,491		1,082
Preferred stock dividends	5		5		10		10
Net income available to common stockholders	$	733	$	542	$	1,481	$	1,072




Net income available to common stockholders per common share
Basic	$	2.48	$	1.75	$	4.99	$	3.44
Diluted	$	2.44	$	1.73	$	4.92	$	3.39

See Notes to Condensed Consolidated Financial Statements.


Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

Condensed Consolidated Statements of Comprehensive Income


	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2024		2023		2024		2023
	(Unaudited)
Net income	$	738	$	547	$	1,491	$	1,082
Other comprehensive income (loss) ("OCI"):
Change in net unrealized gain (loss) on fixed maturities, available-for-sale ("AFS")	(90)		(269)		(250)		317
Change in unrealized losses on fixed maturities with an allowance for credit losses ("ACL")	—		3		1		(3)

Change in net gain (loss) on cash flow hedging instruments	9		(17)		9		(9)
Change in foreign currency translation adjustments	(1)		3		(2)		5
Change in liability for future policy benefits adjustments	5		5		10		(3)
Change in pension and other postretirement plan adjustments	6		5		13		10
Other comprehensive income (loss), net of tax	(71)		(270)		(219)		317
Comprehensive income	$	667	$	277	$	1,272	$	1,399

See Notes to Condensed Consolidated Financial Statements.


Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

Condensed Consolidated Balance Sheets


(in millions, except for share and per share data)	June 30, 2024		December 31, 2023
	(Unaudited)
Assets
Investments:
Fixed maturities, AFS, at fair value (amortized cost of $43,035 and $41,726, and ACL of $19 and $21)	$	40,814	$	39,818
Fixed maturities, at fair value using the fair value option ("FVO Securities")	272		327
Equity securities, at fair value	591		864
Mortgage loans (net of ACL of $48 and $51)	6,357		6,087
Limited partnerships and other alternative investments	4,905		4,785
Other investments	250		191
Short-term investments	3,701		3,850
Total investments	56,890		55,922
Cash	154		126
Restricted cash	56		63
Accrued investment income	429		404
Premiums receivable and agents' balances (net of ACL of $116 and $109)	6,335		5,607
Reinsurance recoverables (net of allowance for uncollectible reinsurance of $102 and $103)	7,059		7,104
Deferred policy acquisition costs	1,245		1,113
Deferred income taxes, net	1,234		1,173
Goodwill	1,911		1,911
Property and equipment, net	878		896
Other intangible assets, net	672		707
Other assets	2,183		1,754

Total assets	$	79,046	$	76,780
Liabilities
Unpaid losses and loss adjustment expenses	$	43,323	$	42,318
Reserve for future policy benefits	464		484
Other policyholder funds and benefits payable	622		638
Unearned premiums	9,521		8,599

Long-term debt	4,364		4,362
Other liabilities	5,072		5,052

Total liabilities	63,366		61,453
Commitments and Contingencies (Note 13)
Stockholders’ Equity
Preferred stock, $0.01 par value — 50,000,000 shares authorized, 13,800 shares issued at June 30, 2024 and December 31, 2023, aggregate liquidation preference of $345	334		334
Common stock, $0.01 par value —1,500,000,000 shares authorized, 326,960,228 shares issued at June 30, 2024 and December 31, 2023	3		3
Additional paid-in capital	558		648
Retained earnings	20,209		19,007
Treasury stock, at cost 32,970,967 and 28,488,130 shares	(2,356)		(1,816)
Accumulated other comprehensive income (loss) ("AOCI"), net of tax	(3,068)		(2,849)
Total stockholders’ equity	15,680		15,327
Total liabilities and stockholders’ equity	$	79,046	$	76,780

See Notes to Condensed Consolidated Financial Statements.


Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

Condensed Consolidated Statements of Changes in Stockholders' Equity


	Three Months Ended June 30,				Six Months Ended June 30,
(in millions, except for share and per share data)	2024		2023		2024		2023
	(Unaudited)
Preferred Stock	$	334	$	334	$	334	$	334
Common Stock	3		3		3		3
Additional Paid-in Capital
Additional Paid-in Capital, beginning of period	551		1,847		648		1,895
Issuance of shares under incentive and stock compensation plans and other	(15)		(5)		(176)		(119)
Stock-based compensation plans expense	22		22		86		88

Additional Paid-in Capital, end of period	558		1,864		558		1,864
Retained Earnings
Retained Earnings, beginning of period	19,614		17,454		19,007		17,058


Net income	738		547		1,491		1,082
Dividends declared on preferred stock	(5)		(5)		(10)		(10)
Dividends declared on common stock	(138)		(131)		(279)		(265)
Retained Earnings, end of period	20,209		17,865		20,209		17,865
Treasury Stock, at cost
Treasury Stock, at cost, beginning of period	(2,037)		(2,044)		(1,816)		(1,773)
Treasury stock acquired	(354)		(353)		(707)		(707)

Issuance of shares under incentive and stock compensation plans from treasury stock and other	36		7		247		139
Net shares acquired related to employee incentive and stock compensation plans	(1)		—		(80)		(49)

Treasury Stock, at cost, end of period	(2,356)		(2,390)		(2,356)		(2,390)
Accumulated Other Comprehensive Income (Loss), net of tax
Accumulated Other Comprehensive Income, net of tax, beginning of period	(2,997)		(3,254)		(2,849)		(3,841)


Total other comprehensive income (loss)	(71)		(270)		(219)		317
Accumulated Other Comprehensive Income (Loss), net of tax, end of period	(3,068)		(3,524)		(3,068)		(3,524)
Total Stockholders’ Equity	$	15,680	$	14,152	$	15,680	$	14,152

Preferred Shares Outstanding	13,800		13,800		13,800		13,800



Common Shares Outstanding (in thousands)
Common Shares Outstanding, beginning of period	296,807		311,780		298,472		315,111
Treasury stock acquired	(3,500)		(5,008)		(7,347)		(9,727)
Issuance of shares under incentive and stock compensation plans and other	700		307		3,704		2,312
Return of shares under incentive and stock compensation plans to treasury stock	(18)		(8)		(840)		(625)

Common Shares Outstanding, at end of period	293,989		307,071		293,989		307,071
Cash dividends declared per common share	$	0.470	$	0.425	$	0.940	$	0.850
Cash dividends declared per preferred share	$	375.00	$	375.00	$	750.00	$	750.00

See Notes to Condensed Consolidated Financial Statements.


Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

Condensed Consolidated Statements of Cash Flows


	Six Months Ended June 30,
(in millions)	2024		2023
Operating Activities	(Unaudited)
Net income	$	1,491	$	1,082
Adjustments to reconcile net income to net cash provided by operating activities:
Net realized losses	31		71
Amortization of deferred policy acquisition costs	1,106		993
Additions to deferred policy acquisition costs	(1,238)		(1,091)
Depreciation and amortization	187		258



Other operating activities, net	198		147
Change in assets and liabilities:
Decrease in reinsurance recoverables	37		42
Net change in accrued and deferred income taxes	(155)		(249)
Increase in insurance liabilities	1,907		731
Net change in premiums receivable and agents' balances	(761)		(660)
Net change in other assets and other liabilities	(446)		(502)
Net cash provided by operating activities	2,357		822

HARTFORD FINANCIAL SERVICES GROUP, INC. [HIG-PG] Filings

HARTFORD FINANCIAL SERVICES GROUP, INC. [HIG] Filings