0000874766 us-gaap:InterestRateContractMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2018-12-31

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________

(Address of principal executive offices) (Zip Code)

(Registrant’s telephone number, including area code)

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

Large accelerated filerx

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. ¨

As of July ~~24, 2018~~29, 2019, there were outstanding ~~358,419,118~~361,581,394 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, ~~2018~~2019

TABLE OF CONTENTS


Item	Description	Page	Description	Page
	Part I		Part I
1.	FINANCIAL STATEMENTS		FINANCIAL STATEMENTS
	REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	5	REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	6
	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2018 AND 2017	6	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018	7
	CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2018 AND 2017	7	CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018	8
	CONDENSED CONSOLIDATED BALANCE SHEETS - AS OF JUNE 30, 2018 AND DECEMBER 31, 2017	8	CONDENSED CONSOLIDATED BALANCE SHEETS - AS OF JUNE 30, 2019 AND DECEMBER 31, 2018	9
	CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017	9	CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018	10
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017	10	CONDENSED CONOLIDATED STATEMENTS OF CASH FLOWS - FOR THE SIX MONTHS ENDED JUNE 30, 2019 AND 2018	11
	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	11	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	12
2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	64	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	52
3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	[a]	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	[a]
4.	CONTROLS AND PROCEDURES	116	CONTROLS AND PROCEDURES	102
	PART II. OTHER INFORMATION		PART II. OTHER INFORMATION
1.	LEGAL PROCEEDINGS	117	LEGAL PROCEEDINGS	103
1A.	RISK FACTORS	118	RISK FACTORS	104
2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	119	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	107
6.	EXHIBITS	120	EXHIBITS	108
	EXHIBITS INDEX	121	EXHIBITS INDEX	109
	SIGNATURE	122	SIGNATURE	110

[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 or in Part I, Item 1A, Risk Factors in The Hartford’s ~~2017~~2018 Form 10-K Annual ~~Report,~~Report; and ~~those identified from time to time in~~ our other filings with the Securities and Exchange Commission ("SEC").

Risks ~~Related~~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;


◦	~~financial risk related to the continued reinvestment of our investment portfolios;~~


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

◦

~~technology~~technological changes, such as usage-based methods of determining premiums, ~~advancement~~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~~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;

◦

~~the impact on our statutory~~ capital ~~of various~~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’~~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;~~Valuations:


◦	risk associated with the use of analytical models in making decisions in key areas such as underwriting, pricing, capital management, ~~hedging,~~ 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~~


◦	~~the significant uncertainties that limit our ability to estimate the ultimate reserves necessary for asbestos and environmental claims;~~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 ~~our~~ capital management ~~plan,~~plans, expense reduction initiatives and other actions, which may include acquisitions, divestitures or restructurings;


◦	risks associated with acquisitions and divestitures, including the ~~potential for difficulties arising~~challenges of integrating acquired companies or businesses or separating from ~~outsourcing~~our divested businesses, which may result in our inability to achieve the anticipated benefits and ~~similar third-party relationships;~~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 ~~shareholders~~stockholders might consider in their best interests; and


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

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 ")~~"Company") as of June 30, ~~2018,~~2019, the related condensed consolidated statements of operations, ~~and~~ comprehensive income (loss), and changes in stockholders' equity for the three-month and six-month periods ended June 30, ~~2018~~2019 and ~~2017,~~2018, and the condensed consolidated ~~statements~~statement of ~~changes in stockholders’ equity and~~ cash flows for the six-month periods ended June 30, ~~2018~~2019 and ~~2017,~~2018, 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, ~~2017,~~2018, 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, 2018,~~22, 2019, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, ~~2017,~~2018, 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 26, 2018~~August 1, 2019

~~Table of Contents~~

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

Condensed Consolidated Statements of Operations


	Three Months Ended June 30,					Six Months Ended June 30,						Three Months Ended June 30,				Six Months Ended June 30,
(In millions, except for per share data)	2018		2017			2018			2017			2019		2018		2019			2018
	(Unaudited)											(Unaudited)
Revenues
Earned premiums	$	3,958	$	3,455		$	7,885		$	6,893		$	4,166	$	3,958	$	8,106		$	7,885
Fee income	327		286			650			564			326		327		640			650
Net investment income	428		395			879			805			488		428		958			879
Net realized capital gains (losses):
Total other-than-temporary impairment ("OTTI") losses	—		(4		)	(2		)	(7		)	—		—		(4		)	(2		)
OTTI losses recognized in other comprehensive income (“OCI”)	—		2			2			4			—		—		2			2
Net OTTI losses recognized in earnings	—		(2		)	—			(3		)	—		—		(2		)	—
Other net realized capital gains	52		57			22			82			80		52		245			22
Total net realized capital gains	52		55			22			79			80		52		243			22
Other revenues	24		23			44			42			32		24		85			44
Total revenues	4,789		4,214			9,480			8,383			5,092		4,789		10,032			9,480
Benefits, losses and expenses
Benefits, losses and loss adjustment expenses	2,738		2,420			5,433			4,844			2,934		2,738		5,619			5,433
Amortization of deferred policy acquisition costs ("DAC")	344		345			686			689			392		344		747			686
Insurance operating costs and other expenses	1,067		1,650			2,104			2,569			1,141		1,067		2,189			2,104
Loss on extinguishment of debt	6		—			6			—			—		6		—			6
Loss on reinsurance transaction												91		—		91			—
Interest expense	79		79			159			159			63		79		127			159
Amortization of other intangible assets	18		1			36			2			15		18		28			36
Total benefits, losses and expenses	4,252		4,495			8,424			8,263			4,636		4,252		8,801			8,424
Income (loss) from continuing operations before income taxes	537		(281		)	1,056			120
Income tax expense (benefit)	103		(129		)	194			(31		)
Income (loss) from continuing operations, net of tax	434		(152		)	862			151
Income from continuing operations, before tax												456		537		1,231			1,056
Income tax expense												84		103		229			194
Income from continuing operations, net of tax												372		434		1,002			862
Income from discontinued operations, net of tax	148		112			317			187			—		148		—			317
Net income (loss)	$	582	$	(40	)	$	1,179		$	338
Income (loss) from continuing operations, net of tax, per common share
Net income												372		582		1,002			1,179
Preferred stock dividends												—		—		5			—
Net income available to common stockholders												$	372	$	582	$	997		$	1,179

Income from continuing operations, net of tax, available to common stockholders per common share
Basic	$	1.21	$	(0.42	)	$	2.41		$	0.41		$	1.03	$	1.21	$	2.76		$	2.41
Diluted	$	1.19	$	(0.42	)	$	2.37		$	0.40		$	1.02	$	1.19	$	2.73		$	2.37
Net income (loss) per common share
Net income available to common stockholders per common share
Basic	$	1.62	$	(0.11	)	$	3.29		$	0.92		$	1.03	$	1.62	$	2.76		$	3.29
Diluted	$	1.60	$	(0.11	)	$	3.24		$	0.90		$	1.02	$	1.60	$	2.73		$	3.24
Cash dividends declared per common share	$	0.25	$	0.23		$	0.50		$	0.46

See Notes to Condensed Consolidated Financial Statements.

~~Table of Contents~~

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

Condensed Consolidated Statements of Comprehensive Income (Loss)

See Notes to Condensed Consolidated Financial Statements.

~~Table of Contents~~

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

Condensed Consolidated Balance Sheets

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 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	4,329			4,363			4,378			4,379
Issuance of shares under incentive and stock compensation plans	(6		)	(9		)	(74		)	(83		)
Stock-based compensation plans expense	21			22			76			83
Issuance of shares for warrant exercise	(44		)	(2		)	(80		)	(5		)
Additional Paid-in Capital, end of period	4,300			4,374			4,300			4,374
Retained Earnings
Retained Earnings, beginning of period	11,572			10,156			11,055			9,642
Cumulative effect of accounting changes, net of tax	—			—			—			5
Adjusted balance, beginning of period	11,572			10,156			11,055			9,647
Net income	372			582			1,002			1,179
Dividends declared on preferred stock	—			—			(5		)	—
Dividends declared on common stock	(108		)	(89		)	(216		)	(177		)
Retained Earnings, end of period	11,836			10,649			11,836			10,649
Treasury Stock, at cost
Treasury Stock, at cost, beginning of period	(1,014		)	(1,141		)	(1,091		)	(1,194		)
Treasury stock acquired	(27		)	—			(27		)	—
Issuance of shares under incentive and stock compensation plans	14			14			85			95
Net shares acquired related to employee incentive and stock compensation plans	(1		)	(3		)	(31		)	(34		)
Issuance of shares for warrant exercise	44			2			80			5
Treasury Stock, at cost, end of period	(984		)	(1,128		)	(984		)	(1,128		)
Accumulated Other Comprehensive Income (Loss), net of tax
Accumulated Other Comprehensive Income (Loss), net of tax, beginning of period	(885		)	(239		)	(1,579		)	663
Cumulative effect of accounting changes, net of tax	—			—			—			(5		)
Adjusted balance, beginning of period	(885		)	(239		)	(1,579		)	658
Total other comprehensive income (loss)	687			(1,114		)	1,381			(2,011		)
Accumulated Other Comprehensive Loss, net of tax, end of period	(198		)	(1,353		)	(198		)	(1,353		)
Total Stockholders’ Equity	$	15,292		$	12,546		$	15,292		$	12,546
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)	360,865			358,077			359,151			356,835
Treasury stock acquired	(505		)	—			(505		)	—
Issuance of shares under incentive and stock compensation plans	325			272			1,859			2,042
Return of shares under incentive and stock compensation plans to treasury stock	(20		)	(42		)	(621		)	(637		)
Issuance of shares for warrant exercise	940			52			1,721			119
Common Shares Outstanding, at end of period	361,605			358,359			361,605			358,359
Cash dividends declared per common share	$	0.30		$	0.25		$	0.60		$	0.50
Cash dividends declared per preferred share	$	—		$	—		$	375.00		$	—

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,						Six Months Ended June 30,
(In millions)	2018			2017			2019			2018
Operating Activities	(Unaudited)						(Unaudited)
Net income	$	1,179		$	338		$	1,002		$	1,179
Adjustments to reconcile net income to net cash provided by operating activities:
Net realized capital losses (gains)	31			(55		)	(243		)	31
Amortization of deferred policy acquisition costs	744			731			747			744
Additions to deferred policy acquisition costs	(701		)	(695		)	(799		)	(701		)
Depreciation and amortization	237			191			221			237
Loss on extinguishment of debt	6			—			—			6
Gain on sale	(213		)	—			—			(213		)
Pension settlement	—			747
Other operating activities, net	291			291			64			291
Change in assets and liabilities:
Decrease in reinsurance recoverables	136			25			57			136
Decrease (increase) in accrued and deferred income taxes	(112		)	40			277			(112		)
Increase (decrease) in unpaid losses and loss adjustment expenses, reserve for future policy benefits, and unearned premiums	(77		)	443
Increase (decrease) in insurance liabilities							565			(77		)
Net change in other assets and other liabilities	(251		)	(1,162		)	(887		)	(251		)
Net cash provided by operating activities	1,270			894			1,004			1,270
Investing Activities
Proceeds from the sale/maturity/prepayment of:
Fixed maturities, available-for-sale	14,712			15,847			10,770			14,712
Fixed maturities, fair value option	11			76			4			11
Equity securities, at fair value	1,027			—			1,024			1,027
Equity securities, available-for-sale				512
Mortgage loans	234			351			346			234
Partnerships	331			138			122			331
Payments for the purchase of:
Fixed maturities, available-for-sale	(13,261		)	(15,954		)	(11,027		)	(13,261		)
Equity securities, at fair value	(953		)	—			(951		)	(953		)
Equity securities, available-for-sale	—			(397		)
Mortgage loans	(383		)	(458		)	(280		)	(383		)
Partnerships	(316		)	(222		)	(167		)	(316		)
Net payments for derivatives	(234		)	(40		)
Net proceeds from (payments for) derivatives							45			(234		)
Net additions of property and equipment	(59		)	(92		)	(44		)	(59		)
Net payments for short-term investments	(2,427		)	(1,453		)
Net proceeds from (payments for) short-term investments							2,090			(2,427		)
Other investing activities, net	(4		)	(6		)	(1		)	(4		)
Proceeds from business sold, net of cash transferred	1,115			222			—			1,115
Net cash used for investing activities	(207		)	(1,476		)
Amount paid for business acquired, net of cash acquired							(1,901		)	—
Net cash provided by (used for) investing activities							30			(207		)
Financing Activities
Deposits and other additions to investment and universal life-type contracts	1,814			2,526			106			1,814
Withdrawals and other deductions from investment and universal life-type contracts	(9,206		)	(7,076		)	(77		)	(9,206		)
Net transfers from separate accounts related to investment and universal life-type contracts	6,949			3,976			—			6,949
Repayments at maturity or settlement of consumer notes	(2		)	(11		)	—			(2		)
Net increase (decrease) in securities loaned or sold under agreements to repurchase	(671		)	1,346			(178		)	(671		)
Repayment of debt	(826		)	(416		)	(413		)	(826		)
Proceeds from the issuance of debt	490			500			—			490
Net return of shares under incentive and stock compensation plans	5			(22		)
Net issuance (return) of shares under incentive and stock compensation plans							(39		)	5
Treasury stock acquired	—			(650		)	(27		)	—
Dividends paid on preferred stock							(11		)	—
Dividends paid on common stock	(180		)	(173		)	(216		)	(180		)
Net cash provided by (used for) financing activities	(1,627		)	—
Net cash used for financing activities							(855		)	(1,627		)
Foreign exchange rate effect on cash	(6		)	62			(17		)	(6		)
Net decrease in cash, including cash classified as assets held for sale	(570		)	(520		)
Less: Net decrease in cash classified as assets held for sale	(537		)	(293		)
Net (decrease) in cash	(33		)	(227		)
Cash – beginning of period	180			328
Cash – end of period	$	147		$	101
Net increase (decrease) in cash, including cash classified as assets held for sale							162			(570		)
Less: Net increase (decrease) in cash classified as assets held for sale							—			(537		)
Net increase (decrease) in cash and restricted cash							162			(33		)
Cash and restricted cash – beginning of period							121			180
Cash and restricted cash– end of period							$	283		$	147
Supplemental Disclosure of Cash Flow Information
Income tax received (paid)	$	(1	)	$	2
Income tax paid							$	(1	)	$	(1	)
Interest paid	$	156		$	164		$	137		$	156

~~Table of Contents~~

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in millions, except for per share data, unless otherwise stated)

~~1. Basis of Presentation and Significant Accounting Policies~~

1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The Hartford Financial Services Group, Inc. is a holding company for insurance and financial services subsidiaries that provide property and casualty insurance, group life and disability products and mutual funds and exchange-traded products to individual and business customers ~~in the United States~~ (collectively, “The Hartford”, the “Company”, “we” or “our”).

On May 23, 2019, the Company completed the previously announced acquisition of The Navigators Group, Inc. ("Navigators Group"), a global specialty underwriter, for $70 a share, or $2.136 billion in cash, including transaction expenses. For further discussion of this transaction, see Note 2 - Business Acquisition of Notes to Condensed Consolidated Financial Statements.

On May 31, 2018, Hartford Holdings, Inc., a wholly owned subsidiary of the Company, completed the sale of the issued and outstanding equity of Hartford Life, Inc. (“HLI”), a holding company, for its life and annuity operating subsidiaries. For further discussion of this transaction, see Note 1817 - Business ~~Dispositions~~Disposition and Discontinued Operations of Notes to Condensed Consolidated Financial Statements.

~~On May 10, 2017, the Company completed the sale of its United Kingdom ("U.K.") property and casualty run-off subsidiaries.~~

The Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, which differ materially from the accounting practices prescribed by various insurance regulatory authorities. These Condensed Consolidated Financial Statements and Notes should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Company's ~~2017~~2018 Form 10-K Annual Report. The results of operations for interim periods are not necessarily indicative of the results that may be expected for the full year.

The accompanying Condensed Consolidated Financial Statements and Notes are unaudited. These financial statements reflect all adjustments (generally consisting only of normal accruals) which are, in the opinion of management, necessary for the fair presentation of the financial position, results of operations and cash flows for the interim periods. The Company's significant accounting policies are summarized in Note 1 - Basis of Presentation and Significant Accounting Policies of Notes to Consolidated Financial Statements included in the Company's ~~2017~~2018 Form 10-K Annual Report.

Consolidation

The Condensed Consolidated Financial Statements include the accounts of The Hartford Financial Services Group, Inc., and entities in which the Company directly or indirectly has a controlling financial interest. Entities in which the Company has significant influence over the operating and financing decisions but does not control are reported using the equity method. All intercompany transactions and balances between The Hartford and its subsidiaries and affiliates that are not held for sale have been eliminated.

Discontinued Operations

The results of operations of a component of the Company are reported in discontinued operations when certain criteria are met as of the date of disposal, or earlier if classified as held-for-sale. When a component is identified for discontinued operations reporting, amounts for prior periods are retrospectively reclassified as discontinued operations. Components are identified as discontinued operations if they are a major part of an entity's operations and financial results such as a separate major line of business or a separate major geographical area of operations.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The most significant estimates include those used in determining property and casualty and group long-term disability insurance product reserves, net of reinsurance; evaluation of goodwill for impairment; valuation of investments and derivative instruments; valuation allowance on deferred tax assets; and contingencies relating to corporate litigation and regulatory matters.

Reclassifications

Certain reclassifications have been made to prior year financial information to conform to the current year presentation. In particular:

~~Distribution costs within~~Restricted cash has been reclassified out of cash to a separate line on the ~~Mutual Funds segment~~Condensed Consolidated Balance Sheets. Restrictions on cash primarily relate to funds that ~~were previously netted against fee income~~ are ~~presented gross in insurance operating costs~~held to support regulatory and ~~other expenses.~~contractual obligations.

Adoption of New Accounting Standards

~~Reclassification of Effect of Tax Rate Change from AOCI to Retained Earnings~~Hedging Activities

~~In February 2018,~~On January 1, 2019, the ~~FASB issued new accounting~~Company adopted the Financial Accounting Standards Board's ("FASB") updated guidance for ~~the~~hedge accounting through a cumulative effect adjustment of less than $1 to reclassify cumulative ineffectiveness on ~~deferred tax assets and liabilities related~~cash flow hedges from retained earnings to ~~items recorded in~~ accumulated other comprehensive income ("AOCI") ~~resulting~~. The updates allow hedge accounting for new types of interest rate hedges of financial instruments and simplify documentation requirements to qualify for hedge accounting. In addition, any gain or loss from ~~legislated Tax Cuts~~hedge ineffectiveness is reported in the same income statement line with the effective hedge results and ~~Jobs Act of 2017 ("Tax Reform") enacted on December 22, 2017. Tax Reform reduced~~ the ~~federal tax rate applied to~~hedged transaction. For cash flow hedges, the ~~Company’s deferred tax balances from 35% to 21% on enactment. Under U.S. GAAP,~~ineffectiveness is recognized in earnings only when the Company recorded the total effect of the change in enacted tax rates on deferred tax balances as a charge to income tax expense within net income during the fourth quarter of 2017, including the change in deferred tax balances related to components of AOCI. The new accounting guidance permitted the Company to reclassify the “stranded” tax effects out of AOCI and into retainedhedged transaction affects earnings; otherwise,

~~Table of Contents~~

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

~~1. Basis of Presentation and Significant Accounting Policies (continued)~~

~~earnings that resulted from recording~~ the ~~tax effects of unrealized investment~~ineffectiveness gains ~~unrecognized actuarial~~or losses ~~on pension~~remain in AOCI. Under previous accounting, total hedge ineffectiveness was reported separately in realized capital gains and other postretirement benefit plans, and cumulative translation adjustments at a 35% tax rate because the 14 point reduction in tax rate was recognized in net income instead of other comprehensive income. On January 1, 2018, the Company adopted the new guidance and recorded a reclassification of $88 from AOCI to retained earnings. As a result of the reclassification, in the first quarter of 2018, the Company reduced the estimated loss on sale recorded in income from discontinued operations by $193, net of tax, for the increase in AOCI related to the assets held for sale. The reduction in the loss on sale resulted in a corresponding increase in assets held for sale and AOCI as of January 1, 2018 and the AOCI associated with assets held for sale was removedlosses apart from the ~~balance sheet when~~hedged transaction. The adoption did not affect the ~~sale closed~~Company’s financial position or cash flows or have a material effect on ~~May 31, 2018. Additionally, as of January 1, 2018, the Company reclassified $105 of stranded tax effects related to continuing operations which reduced AOCI and increased retained earnings.~~net income.

~~Financial Instruments- Recognition and Measurement~~Leases

On January 1, 2018, the Company adopted updated guidance issued by the FASB for the recognition and measurement of financial instruments through a cumulative effect adjustment to the opening balances of retained earnings and AOCI. The new guidance requires investments in equity securities to be measured at fair value with any changes in valuation reported in net income except for investments that are consolidated or are accounted for under the equity method of accounting. The new guidance also requires a deferred tax asset resulting from net unrealized losses on available-for-sale fixed maturities that are recognized in AOCI to be evaluated for recoverability in combination with the Company’s other deferred tax assets. Under prior guidance, the Company reported equity securities, available for sale ("AFS"), at fair value with changes in fair value reported in other comprehensive income. As of January 1, 2018,

the Company reclassified from AOCI to retained earnings net unrealized gains of $83, after tax, related to equity securities having a fair value of $1.0 billion. In addition, $10 of net unrealized gains net of shadow DAC related to discontinued operations were reclassified from AOCI to retained earnings of the life and annuity run-off business held for sale, which increased the estimated loss on sale in 2018 by the same amount. Beginning in 2018, the Company reports equity securities at fair value with changes in fair value reported in net realized capital gains and losses.

~~Revenue Recognition~~

~~On January 1, 2018,~~2019, the Company adopted the FASB’s updated guidance for recognizing revenue from contracts with customers, which excludes insurance contracts and financial instruments. Revenue subject to the guidance is recognized when, or as, goods or services are transferred to customers in an amount that reflects the consideration that an entity is expected to receive in exchange for those goods or services. For all but certain revenues associated with our Mutual Funds business,lease guidance. Under the updated guidance, ~~is consistent~~lessees with ~~previous guidance~~operating leases are required to recognize a liability for the ~~Company’s transactions~~present value of future minimum lease payments with a corresponding asset for the right of use of the property. Prior to the new guidance, future minimum lease payments on operating leases were commitments that were not recognized as liabilities on the balance sheet. Leases are classified as financing or operating leases. Where the lease is economically similar to a purchase because The Hartford obtains control of the underlying asset, the lease is classified as a financing lease and the Company recognizes amortization of the right of use asset and interest

expense on the liability. Where the lease provides The Hartford with only the right to control the use of the underlying asset over the lease term and the lease term is greater than one year, the lease is an operating lease and the lease cost is recognized as rental expense over the lease term on a straight-line basis. Leases with a term of one year or less are also expensed over the lease term but not recognized on the balance sheet. On adoption, The Hartford recorded a lease payment obligation of $160 for outstanding leases and a right of use asset of $150, which is net of $10 in lease incentives received, with no change to comparative periods. As permitted by the new guidance, as of the implementation date, the Company did not reassess whether expired or existing contracts are leases or contain leases, did not change the classification of expired or existing operating leases, and did not ~~have an effect~~reassess initial direct costs for existing leases to determine if deferred costs should be written-off or recorded on adoption. The adoption did not impact net income or cash flows.

2. BUSINESS ACQUISITION

Navigators Group

On May 23, 2019, The Hartford acquired 100% of the outstanding shares of Navigators Group for $70 a share, or $2.121 billion in cash, comprised of cash of $2.098 billion and a liability for cash awards to replace share-based awards of $23. The acquisition of the specialty underwriter expands product offerings and geographic reach, and adds underwriting and industry talent to strengthen the Company’s ~~financial position, cash flows or net income. The updated guidance also updated criteria~~value proposition to agents and customers.

Fair Value of Assets Acquired and Liabilities Assumed at the Acquisition Date



	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

[1] Non-deductible for determining when the Company acts as a principal or an agent. The Company determined that it is the principal for some of its mutual fund distribution service contracts and, upon adoption, reclassified distribution costs of $46 and $92 for the three and six months ended June 30, 2017, respectively, that were previously netted against fee income ~~to insurance operating costs and other expenses.~~

~~Information about the nature, amount, timing of recognition and cash flows for the Company’s revenues subject to the updated guidance follows.~~tax purposes.

~~Table of Contents~~

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

~~1. Basis~~

Intangible Assets Recorded in Connection with the Acquisition



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

The value of ~~Presentation~~in-force contracts represents the estimated profits relating to the unexpired contracts in force net of related prepaid reinsurance at the acquisition date through expiry of the contracts. The value of distribution relationships was estimated using net cash flows expected to come from the renewals of in-force contracts and new business sold through existing distribution partners less costs to service the related policies. The value of the trade name was estimated using an assumed cost of a market-based royalty fee applied to net cash flows expected to come from business marketed as Navigators, a brand of The Hartford. Lloyd's of London is an insurance market-place operating worldwide ("Lloyd's"). Lloyd's does not underwrite risks. Corporate members accept underwriting risks through the syndicates that they form. The Company accepts risks as the sole corporate member of Lloyd's Syndicate 1221 ("Lloyd's Syndicate"). The value of the capacity of Lloyd’s Syndicate was estimated using net cash flows attributable to Navigators Group's right to underwrite business up to an approved level of premium in the Lloyd’s market. The values for in-force contracts, the distribution relationships, trade name and the capacity of the Lloyd's Syndicate were estimated using a discounted cash flow method. Significant ~~Accounting Policies (continued)~~

inputs to the valuation models include estimates of expected new business, premium retention rates, investment returns, claim costs, expenses and discount rates based on a weighted average cost of capital. The value of licenses to write insurance in over 50 U.S. jurisdictions was estimated based on recent transactions for shell companies.

~~Revenue from Non-Insurance Contracts with Customers~~Expected Pre-tax Amortization Expense^[1] for Acquired Intangibles as of June 30, 2019

Three months ended June 30, Six months ended June 30,
Revenue Line Item 2018 2017 2018 2017
Commercial Lines
Installment billing fees Fee income $ 8
$ 9
$ 17
$ 19
Personal Lines
Installment billing fees Fee income 10
11
20
22
Insurance servicing revenues Other revenues 23
23
42
42
Group Benefits
Administrative services Fee income 44
19
88
38
Mutual Funds
Advisor, distribution and other management fees Fee income 239
220
477
431
Other fees Fee income 22
27
42
53
Corporate
Investment management and other fees Fee income 4
—
6
1
Transition service revenues Other revenues 2
—
2
—
Total revenues subject to updated guidance $ 352
$ 309
$ 694
$ 606



	Value of In-force Contracts		Other Intangible Assets
2019 (six months)	$	84	$	11
2020	$	47	$	22
2021	$	21	$	22
2022	$	9	$	22
2023	$	—	$	22

~~Installment fees are charged on property~~[1] In the Condensed Consolidated Statements of Operations, the amortization of value of in-force contracts is reported in amortization of deferred policy acquisition costs and ~~casualty insurance contracts for billing~~ the ~~insurance customer~~amortization of other intangible assets is reported in ~~installments over the policy term. These fees are recognized in fee income as earned on collection.~~

~~Insurance servicing revenues within Personal Lines consist~~amortization of up-front commissions earned for collecting premiums and processing claims on insurance policies for which The Hartford does not assume underwriting risk, predominantly related to the National Flood Insurance Plan program. These insurance servicing revenues are recognized over the period of the flood program's policy terms.

Group Benefits products earn fee income from employers for the administration of underwriting, implementation and claims processing for employer self-funded plans and for leave management services. Fees are recognized as services are provided and collected monthly.

~~The Company provides investment management, administrative and distribution services to mutual funds and exchange-traded products. The Company assesses investment advisory, distribution and~~ other asset management fees primarily based on the average daily net asset values from mutual funds and exchange-traded products, which are recorded in the period in which the services are provided and collected monthly. Fluctuations in domestic and international markets and related investment performance, volume and mix of sales and redemptions of mutual funds or exchange-traded products, and other changes to the composition of assets under management are all factors that ultimately have a direct effect on fee income earned.

Mutual Funds other fees primarily include transfer agent fees, generally assessed as a charge per account, and are recognized as fee income in the period in which the services are provided with payments collected monthly.intangible assets.

~~Corporate investment management~~Property and ~~other fees are primarily for managing third party invested~~equipment includes real estate owned and right of use assets ~~including management~~under leases that were valued based on current values and market rental rates, software that was valued based on estimated replacement cost and furniture and equipment. These will be amortized over periods consistent with the Company’s policy.

The fair value of unpaid losses and loss adjustment expenses net of related reinsurance recoverables was estimated based on the present value of expected future net unpaid loss and loss adjustment expense payments discounted using a risk-free interest rate as of the ~~invested assets~~acquisition date plus a risk margin. The discount and risk margin amounts substantially offset.

Debt assumed in the transaction was valued based on the principal and interest payments discounted at the current market yield. The resulting premium will be amortized to interest expense using the interest method.

The $623 of goodwill recognized is largely attributable to the ~~Talcott Resolution life~~acquired employee workforce and ~~annuity run-off business sold~~underwriting talent, leverageable operating platform, improved investment yield and economies of scale. Goodwill is allocated to the Company's Commercial Lines reporting segment.

Immediately after closing on the acquisition of Navigators Group, effective May 23, 2019, the Company purchased an aggregate excess of loss reinsurance agreement covering adverse reserve development (“Navigators ADC”) from National Indemnity Company ("NICO") on behalf of Navigators Insurance Company and certain of its affiliates (collectively, the “Navigators Insurers”). Under the Navigators ADC, the Navigators Insurers paid NICO a reinsurance premium of $91 in exchange for reinsurance coverage, subject to limited exceptions, of $300 of adverse net loss reserve development that attaches $100 above the Navigators Insurers' existing net loss and allocated loss adjustment reserves as of December 31, 2018 subject to the treaty of $1.816 billion for accidents and losses prior to December 31, 2018. In addition to recognizing a$91 before tax charge to earnings in the second quarter of 2019 for the Navigators ADC reinsurance premium, the Company recognized a charge against earnings of $97 before tax in the second quarter of 2019 as a result of a review of Navigators Insurers’ net acquired reserves upon acquisition of the business. Navigators Insurers had previously recognized $52 before tax of adverse reserve development in the first quarter of 2019, including $32 of adverse development subject to the Navigators ADC. As such, reserve development of $97 before tax in the second quarter of 2019 included $68 remaining of the $100 Navigators ADC retention for 2018 ~~("Talcott Resolution"). These fees, calculated based on~~and prior accident years and $29 of adverse reserve development related to the ~~average quarterly net asset values, are~~2019 accident year which is not covered by the ADC. The $68 of reserve development for the 2018 and prior accident years recorded in the ~~period in which~~second quarter of 2019 was net of a $91 reinsurance recoverable recognized under the ~~services are provided and are collected quarterly. Fluctuations in markets and interest rates and other changes to~~Navigators ADC with the ~~composition~~Company having ceded $91 of ~~assets under management are all factors that ultimately have a direct effect on fee income earned.~~

~~Corporate transition service revenues consist~~the $300 available limit, leaving $209 of ~~operational services provided to~~remaining limit. The ~~Hartford’s former life and annuity run-off business that~~Navigators ADC will be ~~provided~~accounted for as retroactive reinsurance and future adverse reserve development, if any, would result in recognizing a deferred gain.

Since the acquisition date of May 23, 2019, the revenues and net losses of the business acquired have been included in the Company's Consolidated Statements of Operations in the Commercial Lines reporting segment and were $178 and $141, respectively, during the period ~~up to 24 months~~ from the ~~May 31, 2018 sale date. The transition service revenues are recognized as other revenues in the period in which the services are provided with payments collected monthly.~~acquisition date to June

~~Table of Contents~~

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

~~2. Business Acquisitions~~

~~Aetna Group Insurance~~30, 2019, including the $91 before tax ($72 net of tax) of premium paid for the Navigators ADC and the charge of $97 before tax ($77 net of tax) for the increase in acquired reserves following the acquisition.

~~On November 1, 2017,~~ The ~~Hartford acquired Aetna's U.S. group life~~Company recognized $15 of acquisition related costs for the six months ended June 30, 2019. These costs are included in insurance operating costs and ~~disability business through a reinsurance transaction for total consideration~~other expenses in the Condensed Consolidated Statement of ~~$1.452 billion.~~ Operations.

The acquisition date fair values of ~~certain~~ assets and liabilities, including insurance reserves and intangible assets, as well as the related estimated useful lives of intangibles, are provisional and are subject to revision within one year of the acquisition date. Under the terms of the agreement, a final balance sheet will be agreed to in 2018 and our estimates of fair values are pending finalization. There were no adjustments to the provisional amounts during the six month period ended June 30, 2018.

The following table presents supplemental unaudited pro forma amounts of revenue and net income for the ~~Company~~six months ended

June 30, 2019 and 2018 for the ~~three and six months ended June 30, 2017,~~Company as though the business was acquired on January 1, ~~2016.~~

~~Pro Forma Results~~

Three months ended June 30, 2017 [1] Six months ended June 30, 2017 [1]
Total Revenue $ 4,793
$ 9,532
Net Income $ (20 ) $ 370

~~[1]~~2018. Pro forma adjustments include the revenue and earnings of ~~the Aetna U.S. group life and disability business~~Navigators Group for each period as well as amortization of identifiable intangible assets ~~acquired and~~acquired.

Pro Forma Results for the fair value adjustment to acquired insurance reserves. Pro forma adjustments do not include retrospective adjustments to defer and amortize acquisition costs as would be recorded under the Company’s accounting policy.Six Months Ended June 30



	Revenue		Earnings
2019 Supplemental (unaudited) combined pro forma	$	10,708	$	997
2018 Supplemental (unaudited) combined pro forma	$	10,185	$	1,235

3. EARNINGS PER COMMON SHARE



Computation of Basic and Diluted Earnings per Common Share
	Three Months Ended June 30,				Six Months Ended June 30,
(In millions, except for per share data)	2019		2018		2019		2018
Earnings
Income from continuing operations, net of tax	$	372	$	434	$	1,002	$	862
Less: Preferred stock dividends	—		—		5		—
Income from continuing operations, net of tax, available to common stockholders	372		434		$	997	$	862
Income from discontinued operations, net of tax, available to common stockholders	—		148		—		317
Net income available to common stockholders	$	372	$	582	$	997	$	1,179
Shares
Weighted average common shares outstanding, basic	361.4		358.3		360.7		357.9
Dilutive effect of stock-based awards under compensation plans	3.2		4.0		3.3		4.2
Dilutive effect of warrants [1]	0.5		1.9		0.9		2.0
Weighted average common shares outstanding and dilutive potential common shares	365.1		364.2		364.9		364.1
Earnings per common share
Basic
Income from continuing operations, net of tax, available to common stockholders	$	1.03	$	1.21	$	2.76	$	2.41
Income from discontinued operations, net of tax, available to common stockholders	—		0.41		—		0.88
Net income available to common stockholders	$	1.03	$	1.62	$	2.76	$	3.29
Diluted
Income from continuing operations, net of tax, available to common stockholders	$	1.02	$	1.19	$	2.73	$	2.37
Income from discontinued operations, net of tax, available to common stockholders	—		0.41		—		0.87
Net income available to common stockholders	$	1.02	$	1.60	$	2.73	$	3.24

[1] On June 26, 2019, the Capital Purchase Program warrants issued in 2009 expired.

~~Table of Contents~~

4. SEGMENT INFORMATION

The Company currently conducts business principally in five reporting segments including Commercial Lines, Personal Lines, Property & Casualty Other Operations, Group Benefits and

Hartford Funds, as well as a Corporate category. The Company includes in the Corporate category discontinued operations related to the life and annuity business sold in May 2018,

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

~~3. Earnings Per Common Share~~

Computation of Basic and Diluted Earnings per Common Share
Three Months Ended June 30, Six Months Ended June 30,
(In millions, except for per share data) 2018 2017 2018 2017
Earnings
Income (loss) from continuing operations, net of tax $ 434
$ (152 ) $ 862
$ 151
Income from discontinued operations, net of tax 148
112
317
187
Net income (loss) $ 582
$ (40 ) $ 1,179
$ 338
Shares
Weighted average common shares outstanding, basic 358.3
366.0
357.9
368.7
Dilutive effect of stock compensation plans 4.0
—
4.2
4.0
Dilutive effect of warrants 1.9
—
2.0
2.8
Weighted average common shares outstanding and dilutive potential common shares 364.2
366.0
364.1
375.5
Net income per common share
Basic
Income (loss) from continuing operations, net of tax $ 1.21
$ (0.42 ) $ 2.41
$ 0.41
Income from discontinued operations, net of tax $ 0.41
$ 0.31
$ 0.88
$ 0.51
Net income (loss) per common share $ 1.62
$ (0.11 ) $ 3.29
$ 0.92
Diluted
Income (loss) from continuing operations, net of tax $ 1.19
$ (0.42 ) $ 2.37
$ 0.40
Income from discontinued operations, net of tax $ 0.41
$ 0.31
$ 0.87
$ 0.50
Net income (loss) per common share $ 1.60
$ (0.11 ) $ 3.24
$ 0.90

As a result of the net loss from continuing operations for the three months ended June 30, 2017, the Company was required to use basic weighted average common shares outstanding in the calculation of diluted loss per share, since the inclusion of 3.8 million shares for stock compensation plans and 2.5 million shares for warrants would have been antidilutive to the earnings (loss) per share calculation. In the absence of the net loss, weighted average common shares outstanding and dilutive potential common shares would have totaled 372.3 million.

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~4. Segment Information~~

~~The Company currently conducts business principally in~~ ~~five~~ reporting segments including Commercial Lines, Personal Lines, Property & Casualty Other Operations, Group Benefits, and Mutual Funds, as well as a Corporate category. The Company includes in the Corporate category investment management fees and expenses related to managing third party business, including management of the invested assets of the Talcott Resolution life and annuity run-off business sold in the second quarter of 2018, discontinued operations related to the sale of Talcott Resolution, reserves for run-off structured settlement and terminal funding agreement liabilities, capital raising activities (including debt financing and related interest expense), transaction expenses incurred in connection with an acquisition, certain purchase accounting adjustments related to goodwill and other expenses not allocated to the reporting segments. Corporate also includes investment management fees and expenses related to managing third party business, including management of the invested assets of Talcott Resolution Life, Inc. and its subsidiaries ("Talcott Resolution"). Talcott Resolution is the new holding company of the life and annuity business the Company sold in May 2018. In

addition, Corporate includes a 9.7% ownership interest in the ~~limited partnership~~legal entity that acquired ~~Talcott Resolution.~~the sold life and annuity business. For further discussion of continued involvement ~~with Talcott Resolution,~~in the life and annuity business sold in May 2018, see Note 1817 - Business ~~Dispositions~~Disposition and Discontinued Operations of Notes to Condensed Consolidated Financial Statements.

The Company's revenues are generated primarily in the United States ("U.S.")~~. Any foreign sourced revenue is immaterial.~~ as well as in the United Kingdom, continental Europe and other international locations.

Net Income ~~(Loss)~~



	Three Months Ended June 30,					Six Months Ended June 30,
	2019			2018		2019			2018
Commercial Lines	$	191		$	372	$	554		$	670
Personal Lines	62			6		158			95
Property & Casualty Other Operations	11			5		34			22
Group Benefits	113			96		231			150
Hartford Funds	38			37		68			71
Corporate	(43		)	66		(43		)	171
Net income	372			582		1,002			1,179
Preferred stock dividends	—			—		5			—
Net income available to common stockholders	$	372		$	582	$	997		$	1,179

Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
Commercial Lines $ 372
$ 258
$ 670
$ 489
Personal Lines 6
24
95
57
Property & Casualty Other Operations 5
20
22
44
Group Benefits 96
69
150
114
Mutual Funds 37
24
71
47
Corporate 66
(435 ) 171
(413 )
Net income (loss) $ 582
$ (40 ) $ 1,179
$ 338

~~Table of Contents~~

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

~~4. Segment Information~~ ~~(continued)~~

Revenues



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Earned premiums and fee income:
Commercial Lines
Workers’ compensation	$	832	$	832	$	1,656	$	1,650
Liability	233		159		401		310
Marine	27		—		27		—
Package business	365		338		717		670
Property	175		152		331		302
Professional liability	98		63		166		125
Bond	65		61		125		119
Assumed reinsurance	29		—		29		—
Automobile	172		148		330		297
Total Commercial Lines	1,996		1,753		3,782		3,473
Personal Lines
Automobile	565		604		1,126		1,211
Homeowners	246		262		493		524
Total Personal Lines [1]	811		866		1,619		1,735
Group Benefits
Group disability	723		690		1,427		1,367
Group life	638		652		1,281		1,316
Other	61		59		123		119
Total Group Benefits	1,422		1,401		2,831		2,802
Hartford Funds
Mutual fund and Exchange-Traded Products ("ETP")	227		236		443		468
Talcott Resolution life and annuity separate accounts [2]	24		25		46		51
Total Hartford Funds	251		261		489		519
Corporate	12		4		25		6
Total earned premiums and fee income	4,492		4,285		8,746		8,535
Net investment income	488		428		958		879
Net realized capital gains	80		52		243		22
Other revenues	32		24		85		44
Total revenues	$	5,092	$	4,789	$	10,032	$	9,480

Three Months Ended June 30, Six Months Ended June 30,

2018 2017 2018 2017
Earned premiums and fee income
Commercial Lines
Workers’ compensation $ 832
$ 820
$ 1,650
$ 1,633
Liability 159
152
310
300
Package business 338
326
670
640
Automobile 148
161
297
322
Professional liability 63
60
125
120
Bond 61
58
119
113
Property 152
152
302
299
Total Commercial Lines 1,753
1,729
3,473
3,427
Personal Lines

Automobile 604
660
1,211
1,322
Homeowners 262
281
524
564
Total Personal Lines [1] 866
941
1,735
1,886
Group Benefits
Group disability 690
379
1,367
760
Group life 652
394
1,316
793
Other 59
51
119
106
Total Group Benefits 1,401
824
2,802
1,659
Mutual Funds
Mutual fund and Exchange-Traded Products ("ETP") [2] 236
221
468
432
Talcott Resolution life and annuity separate accounts [3] 25
26
51
52
Total Mutual Funds 261
247
519
484
Corporate 4
—
6
1
Total earned premiums and fee income 4,285
3,741
8,535
7,457
Net investment income 428
395
879
805
Net realized capital gains 52
55
22
79
Other revenues 24
23
44
42
Total revenues $ 4,789
$ 4,214
$ 9,480
$ 8,383


[1]	For the three months endedJune 30, ~~2018~~2019 and ~~2017~~2018, AARP members accounted for earned premiums of $726 and $758 ~~and~~ ~~$800~~, respectively. For the six months endedJune 30, ~~2018~~2019 and ~~2017~~2018, AARP members accounted for earned premiums of $1.4 billion and $1.5 billion ~~and~~ ~~$1.6 billion~~, respectively.


[2]	~~Excludes distribution costs of~~ ~~$46~~ ~~and~~ ~~$92~~Represents revenues earned for investment advisory services on the ~~three and~~ ~~six months ended June 30,2017, respectively, that were previously netted against fee income and are now presented gross in insurance operating costs and other expenses.~~


~~[3]~~	~~Relates to Talcott Resolution~~ life and annuity ~~business~~separate account AUM sold in May 2018 that is still managed by the Company's ~~Mutual~~Hartford Funds segment.

~~Table of Contents~~

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Revenue from Non-Insurance Contracts with Customers



		Three months ended June 30,				Six months ended June 30,
	Revenue Line Item	2019		2018		2019		2018
Commercial Lines
Installment billing fees	Fee income	$	9	$	8	$	18	$	17
Personal Lines
Installment billing fees	Fee income	10		10		19		20
Insurance servicing revenues	Other revenues	23		23		42		42
Group Benefits
Administrative services	Fee income	45		44		90		88
Hartford Funds
Advisor, distribution and other management fees	Fee income	228		239		446		477
Other fees	Fee income	22		22		43		42
Corporate
Investment management and other fees	Fee income	11		4		24		6
Transition service revenues	Other revenues	6		2		12		2
Total non-insurance revenues with customers		$	354	$	352	$	694	$	694

5. ~~Fair Value Measurements~~

FAIR VALUE MEASUREMENTS

The Company carries certain financial assets and liabilities at estimated fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants. Our fair value framework includes a hierarchy that gives the highest priority to the use of quoted prices in active markets, followed by the use of market observable inputs, followed by the use of unobservable inputs. The fair value hierarchy levels are as follows:


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.

The Company will classify the financial asset or liability by level based upon the lowest level input that is significant to the determination of the fair value. In most cases, both observable inputs (e.g., changes in interest rates) and unobservable inputs (e.g., changes in risk assumptions) are used to determine fair values that the Company has classified within Level 3.

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Assets and (Liabilities) Carried at Fair Value by Hierarchy Level as of June 30, 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") $ 994
$ —
$ 937
$ 57
Collateralized debt obligations ("CDOs") 1,089
—
930
159
Commercial mortgage-backed securities ("CMBS") 3,494
—
3,466
28
Corporate 13,349
—
12,790
559
Foreign government/government agencies 1,133
—
1,130
3
Municipal 11,142
—
11,133
9
Residential mortgage-backed securities ("RMBS") 3,207
—
2,070
1,137
U.S. Treasuries 1,786
378
1,408
—
Total fixed maturities 36,194
378
33,864
1,952
Fixed maturities, FVO 36
—
36
—
Equity securities, at fair value 1,003
892
45
66
Derivative assets
Credit derivatives 15
—
15
—
Equity derivatives 1
—
—
1
Foreign exchange derivatives (1 ) —
(1 ) —
Total derivative assets [1] 15
—
14
1
Short-term investments 3,296
861
2,435
—
Total assets accounted for at fair value on a recurring basis $ 40,544
$ 2,131
$ 36,394
$ 2,019
Liabilities accounted for at fair value on a recurring basis
Derivative liabilities
Credit derivatives (5 ) —
(5 ) —
Foreign exchange derivatives (11 ) —
(11 ) —
Interest rate derivatives (59 ) —
(61 ) 2
Total derivative liabilities [2] (75 ) —
(77 ) 2
Contingent consideration [3] (31 ) —
—
(31 )
Total liabilities accounted for at fair value on a recurring basis $ (106 ) $ —
$ (77 ) $ (29 )

~~Table of Contents~~

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

~~5. Fair Value Measurements~~ ~~(continued)~~

In connection with the acquisition of Navigators Group, the Company has overseas deposits in Other Invested Assets of $49 as of June 30, 2019, which are measured at fair value using the net asset value as a practical expedient. There were no overseas deposits held as of December 31, 2018.

Fixed Maturities, Equity Securities, Short-term Investments, and Derivatives

Valuation Techniques

The Company generally determines fair values using valuation techniques that use prices, rates, and other relevant information

evident from market transactions involving identical or similar instruments. Valuation techniques also include, where appropriate, estimates of future cash flows that are converted into a single discounted amount using current market expectations. The Company uses a "waterfall" approach

comprised of the following pricing sources and techniques, which are listed in priority order:

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

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

reported trades, they may use a discounted cash flow technique to develop a price using expected cash flows based upon the anticipated future performance of the underlying collateral discounted at an estimated market rate. Both

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~5. Fair Value Measurements~~ ~~(continued)~~

techniques develop prices that consider the time value of future cash flows and provide a margin for risk, including liquidity and credit risk. Most prices provided by third-party pricing services are classified as Level 2 because the inputs used in pricing the securities are observable. However, some securities that are less liquid or trade less actively are classified as Level 3. Additionally, certain long-dated securities, such as municipal securities and bank loans, include benchmark interest rate or credit spread assumptions that are not observable in the marketplace and are thus classified as Level 3.

Internal matrix pricing, which is a valuation process internally developed for private placement securities for which the Company is unable to obtain a price from a third-party pricing service. Internal pricing matrices determine credit spreads that, when combined with risk-free rates, are applied to contractual cash flows to develop a price. The Company develops credit spreads using market based data for public securities adjusted for credit spread differentials between public and private securities, which are obtained from a survey of multiple private placement brokers. The market-based reference credit spread considers the issuer’s financial strength and term to maturity, using an independent 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.

The fair value of derivative instruments is determined primarily using a discounted cash flow model or option model technique and ~~incorporate~~incorporates counterparty credit risk. In some cases, quoted market prices for exchange-traded and ~~OTC-cleared~~over-the-counter ("OTC") cleared derivatives may be used and in other cases independent broker quotes may be used. The pricing valuation models primarily use inputs that are observable in the market or can be corroborated by observable market data. The valuation of certain derivatives may include significant inputs that are unobservable, such as volatility levels, and reflect the Company’s view of what other market participants would use when pricing such instruments.

Valuation Controls

The fair value process for investments is monitored by the Valuation Committee, which is a cross-functional group of senior management within the Company that meets at least quarterly. The purpose of the committee is to oversee the pricing policy and procedures, as well as to approve changes to valuation methodologies and pricing sources. Controls and procedures used to assess third-party pricing services are reviewed by the

Valuation Committee, including the results of annual due-diligence reviews.

There are also two working groups under the Valuation Committee: a Securities Fair Value Working Group (“Securities Working Group”) and a Derivatives Fair Value Working Group ("Derivatives Working Group"). The working groups, which include various investment, operations, accounting and risk management professionals, meet monthly to review market data trends, pricing and trading statistics and results, and any proposed pricing methodology changes.

The Securities Working Group reviews prices received from third parties to ensure that the prices represent a reasonable estimate of the fair value. The group considers trading volume, new issuance activity, market trends, new regulatory rulings and other factors to determine whether the market activity is significantly different than normal activity in an active market. A dedicated pricing unit follows up with trading and investment sector professionals and challenges prices of third-party pricing services when the estimated assumptions used differ from what the unit believes a market participant would use. If the available evidence indicates that pricing from third-party pricing services or broker quotes is based upon transactions that are stale or not from trades made in an orderly market, the Company places little, if any, weight on the third party service’s transaction price and will estimate fair value using an internal process, such as a pricing matrix.

The Derivatives Working Group reviews the inputs, assumptions and methodologies used to ensure that the prices represent a reasonable estimate of the fair value. A dedicated pricing team works directly with investment sector professionals to investigate the impacts of changes in the market environment on prices or valuations of derivatives. New models and any changes to current models are required to have detailed documentation and are validated to a second source. The model validation documentation and results of validation are presented to the Valuation Committee for approval.

The Company conducts other monitoring controls around securities and derivatives pricing including, but not limited to, the following:

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.

In addition, the Company’s enterprise-wide Operational Risk Management function, led by the Chief Risk Officer, is responsible for model risk management and provides an independent review of the suitability and reliability of model inputs, as well as an analysis of significant changes to current models.

~~Table of Contents~~

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

~~5. Fair Value Measurements~~ ~~(continued)~~

Valuation Inputs

Quoted prices for identical assets in active markets are considered Level 1 and consist of on-the-run U.S. Treasuries,

money market funds, exchange-traded equity securities, open-ended mutual funds, certain short-term investments, and exchange traded futures and option contracts.

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~5. Fair Value Measurements~~ ~~(continued)~~

~~Table of Contents~~

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

~~5. Fair Value Measurements~~ ~~(continued)~~

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~5. Fair Value Measurements~~ ~~(continued)~~

The tables above ~~excludes ABS and~~exclude certain ~~corporate~~ securities for which fair values are predominately based on independent broker quotes. While the Company does not have access to the significant unobservable inputs that independent brokers may use in their pricing process, the Company believes brokers likely use inputs

similar to those used by the Company and third-party pricing services to price similar instruments. As such, in their pricing models, brokers likely use estimated loss severity rates, prepayment rates, constant default rates and credit spreads. Therefore, similar to non-broker priced securities, increases in

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

these inputs would generally cause fair values to decrease. ~~For the three and six months ended~~As of June 30, ~~2018,~~2019, no significant adjustments were made by the Company to broker prices received.

~~Transfers between Levels~~

Transfers of securities among the levels occur at the beginning of the reporting period. The amount of transfers from Level 1 to Level 2 was $549 and $882 for three and six months ended June 30, 2018, respectively, and $428 and $806 for the three and six months ended June 30, 2017, respectively, which represented previously on-the-run U.S. Treasury securities that are now off-the-run. Transfers from Level 2 to Level 1 for both the three and six months ended June 30, 2018, were immaterial and there were no transfers from Level 2 to Level 1 for the same period in 2017. See the fair value rollforward tables for the three and six months ended June 30, 2018 and 2017, for the transfers into and out of Level 3.

Contingent Consideration

The acquisition of Lattice Strategies LLC ("Lattice") inon July 29, 2016 requires the Company to make payments to former owners of Lattice of up to $60 contingent upon growth in exchange-traded products ("ETP") assets under management ("AUM") over a ~~four-year~~ period of four years beginning on the date of acquisition. The contingent

consideration is measured at fair value on a quarterly basis by projecting future eligible ETP AUM over the contingency period to estimate the amount of expected payout. The future expected payout is discounted back to the valuation date using a risk-adjusted discount rate of ~~16.7%~~12.7%. The risk-adjusted discount rate is an internally generated and significant unobservable input to fair value.

The contingency period for ETP AUM growth ends ~~in June,~~July 29, 2020 and management ~~will adjust~~adjusts the fair value of the contingent consideration ~~if and~~ when it revises its projection of ETP AUM for the acquired business. Before discounting to fair value, the Company ~~has accrued~~estimates a total contingent ~~commission~~consideration payout of $43, of which $20 was paid in the first six months of 2019 with ETP AUM

reaching $2.5 billion during the second quarter of 2019. Accordingly, as of June 30, 2019, the fair value of $21 reflects remaining consideration payable of ~~$40~~$23, assuming ETP AUM for the acquired business grows to approximately $4$4.3 billion over the contingency period. ~~The Company will evaluate the projected AUM growth again in the third quarter of 2018.~~

Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs

The Company uses derivative instruments to manage the risk associated with certain assets and liabilities. However, the derivative instrument may not be classified with the same fair value hierarchy level as the associated asset or liability. Therefore, the realized and unrealized gains and losses on derivatives reported in the Level 3 rollforward may be offset by realized and unrealized gains and losses of the associated assets and liabilities in other line items of the financial statements.

~~Table of Contents~~



Fair Value Rollforwards for Financial Instruments Classified as Level 3 for the Three Months Ended June 30, 2019
					Total realized/unrealized gains (losses)
		Fair value as of March 31, 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 June 30, 2019
Assets
Fixed Maturities, AFS
	ABS	$	9		$	—		$	—	$	5	$	—		$	—		$	—	$	(9	)	$	5
	CLOs	114			—			—		202		(10		)	—			—		(20		)	286
	CMBS	12			—			—		24		(1		)	—			—		—			35
	Corporate	525			—			2		58		(4		)	(39		)	34		(8		)	568
	Foreign Govt./Govt. Agencies	3			—			—		—		—			—			—		—			3
	RMBS	771			—			—		90		(58		)	—			—		(45		)	758
Total Fixed Maturities, AFS		1,434			—			2		379		(73		)	(39		)	34		(82		)	1,655
Equity Securities, at fair value		73			—			—		4		—			(5		)	—		—			72
Derivatives, net [4]
	Equity	1			(4		)	—		—		—			—			—		—			(3		)
Total Derivatives, net [4]		1			(4		)	—		—		—			—			—		—			(3		)
Total Assets		$	1,508		$	(4	)	$	2	$	383	$	(73	)	$	(44	)	$	34	$	(82	)	$	1,724
Liabilities
Contingent Consideration		(29		)	(2		)	—		—		10			—			—		—			(21		)
Total Liabilities		$	(29	)	$	(2	)	$	—	$	—	$	10		$	—		$	—	$	—		$	(21	)

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

~~5. Fair Value Measurements~~ ~~(continued)~~

~~Table of Contents~~



Fair Value Rollforwards for Financial Instruments Classified as Level 3 for the Six Months Ended June 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 June 30, 2019
Assets
Fixed Maturities, AFS
	ABS	$	10		$	—		$	—		$	5	$	(1	)	$	—		$	—	$	(9	)	$	5
	CLOs	100			—			—			237		(10		)	(6		)	—		(35		)	286
	CMBS	12			—			1			24		(2		)	—			—		—			35
	Corporate	520			(1		)	9			95		(6		)	(64		)	46		(31		)	568
	Foreign Govt./Govt. Agencies	3			—			—			—		—			—			—		—			3
	RMBS	920			1			(2		)	134		(112		)	(35		)	—		(148		)	758
Total Fixed Maturities, AFS		1,565			—			8			495		(131		)	(105		)	46		(223		)	1,655
Equity Securities, at fair value		77			(1		)	—			9		—			(13		)	—		—			72
Derivatives, net [4]
	Equity	3			(6		)	—			—		—			—			—		—			(3		)
	Interest rate	1			(1		)	—			—		—			—			—		—			—
Total Derivatives, net [4]		4			(7		)	—			—		—			—			—		—			(3		)
Total Assets		$	1,646		$	(8	)	$	8		$	504	$	(131	)	$	(118	)	$	46	$	(223	)	$	1,724
Liabilities
Contingent Consideration		(35		)	(6		)	—			—		20			—			—		—			(21		)
Total Liabilities		$	(35	)	$	(6	)	$	—		$	—	$	20		$	—		$	—	$	—		$	(21	)

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

~~5. Fair Value Measurements~~ ~~(continued)~~

~~Table of Contents~~



Fair Value Rollforwards for Financial Instruments Classified as Level 3 for the Three Months Ended June 30, 2018
					Total realized/unrealized gains (losses)
		Fair value as of March 31, 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 June 30, 2018
Assets
Fixed Maturities, AFS
	ABS	$	14		$	—		$	—		$	50	$	(1	)	$	—		$	3	$	(9	)	$	57
	CLOs	106			—			—			77		—			(4		)	—		(20		)	159
	CMBS	33			—			—			25		(2		)	(8		)	—		(20		)	28
	Corporate	515			—			(7		)	66		(18		)	(8		)	15		(4		)	559
	Foreign Govt./Govt. Agencies	2			—			—			1		—			—			—		—			3
	Municipal	16			—			—			—		—			—			—		(7		)	9
	RMBS	1,233			—			(4		)	68		(93		)	(1		)	—		(66		)	1,137
Total Fixed Maturities, AFS		1,919			—			(11		)	287		(114		)	(21		)	18		(126		)	1,952
Equity Securities, at fair value		65			—			1			1		—			(1		)	—		—			66
Derivatives, net [4]
	Equity	1			(1		)	—			1		—			—			—		—			1
	Interest rate	2			—			—			—		—			—			—		—			2
Total Derivatives, net [4]		3			(1		)	—			1		—			—			—		—			3
Total Assets		$	1,987		$	(1	)	$	(10	)	$	289	$	(114	)	$	(22	)	$	18	$	(126	)	$	2,021
Liabilities
Contingent Consideration		(27		)	(4		)	—			—		—			—			—		—			(31		)
Total Liabilities		$	(27	)	$	(4	)	$	—		$	—	$	—		$	—		$	—	$	—		$	(31	)

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

~~5. Fair Value Measurements~~ ~~(continued)~~

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~5. Fair Value Measurements~~ ~~(continued)~~

~~For additional information, see Note~~ 2 - ~~Business Acquisitions~~ ~~of Notes to Consolidated Financial Statements included in the Company's 2017 form 10-K Annual Report for discussion of the contingent consideration in connection with the acquisition of Lattice.~~

~~Table of Contents~~

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

~~5. Fair Value Measurements~~ ~~(continued)~~

Changes in Unrealized Gains (Losses) for Financial Instruments Classified as

Level 3 Still Held at End of Period

~~For additional information, see Note~~ 2 - ~~Business Acquisitions~~ ~~of Notes to Consolidated Financial Statements included~~Changes in unrealized gain/(loss) on fixed maturities, AFS are reported in changes in net unrealized gain on securities in the ~~Company's 2017 form 10-K Annual Report for discussion~~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 ~~contingent consideration in connection with the acquisition~~Condensed Consolidated Statements of ~~Lattice.~~

Fair Value Option

The Company has elected the fair value option for certain securities that contain embedded credit derivatives with underlying credit risk primarily related to residential real estate, and these securities are included within Fixed Maturities, FVO on the Condensed Consolidated Balance Sheets. The Company reports changes in the fair value of these securities in net realized capital gains and losses.

Changes in Fair Value of Assets using Fair Value Option
Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
Assets
Fixed maturities, FVO
Corporate $ —
$ —
$ —
$ (1 )
RMBS —
1
—
1
Total fixed maturities, FVO —
1
—
—
Total realized capital gains $ —
$ 1
$ —
$ —

As of June 30, 2019 and December 31, 2018, the fair value of assets and liabilities using the fair value option was $49 and $22, respectively, within the residential real estate sector.

For the three and six months ended June 30, 2019 and 2018 there were no realized capital gains (losses) related to the fair value of assets using the fair value option.

Fair Value of Assets and Liabilities using the Fair Value Option
June 30, 2018 December 31, 2017
Assets
Fixed maturities, FVO
RMBS $ 36
$ 41
Total fixed maturities, FVO $ 36
$ 41

Financial Instruments Not Carried at Fair Value



Financial Assets and Liabilities Not Carried at Fair Value
	June 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	$	3,612	$	3,746	Level 3	$	3,704	$	3,746
Liabilities
Other policyholder funds and benefits payable	Level 3	$	799	$	816	Level 3	$	774	$	775
Senior notes [1]	Level 2	$	3,461	$	4,038	Level 2	$	3,589	$	3,887
Junior subordinated debentures [1]	Level 2	$	1,089	$	1,097	Level 2	$	1,089	$	1,052

~~Table of Contents~~

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

~~5. Fair Value Measurements~~ ~~(continued)~~

~~Financial Instruments Not Carried at Fair Value~~



Net Realized Capital Gains
	Three Months Ended June 30,						Six Months Ended June 30,
(Before tax)	2019			2018			2019			2018
Gross gains on sales	$	69		$	46		$	113		$	65
Gross losses on sales	(19		)	(31		)	(40		)	(88		)
Equity securities [1]	30			26			162			42
Net OTTI losses recognized in earnings	—			—			(2		)	—
Valuation allowances on mortgage loans	1			—			1			—
Transactional foreign currency revaluation	—			—			—			1
Non-qualifying foreign currency derivatives	(1		)	4			—			1
Other, net [2]	—			7			9			1
Net realized capital gains	$	80		$	52		$	243		$	22

Financial Assets and Liabilities Not Carried at Fair Value
Fair Value Hierarchy Level Carrying Amount Fair Value
June 30, 2018
Assets
Mortgage loans Level 3 $ 3,355
$ 3,340
Liabilities
Other policyholder funds and benefits payable Level 3 $ 795
$ 797
Senior notes [1] Level 2 $ 3,586
$ 3,991
Junior subordinated debentures [1] Level 2 $ 1,089
$ 1,173
December 31, 2017
Assets
Mortgage loans Level 3 $ 3,175
$ 3,220
Liabilities
Other policyholder funds and benefits payable Level 3 $ 825
$ 827
Senior notes [1] Level 2 $ 3,415
$ 4,054
Junior subordinated debentures [1] Level 2 $ 1,583
$ 1,699


[1]	~~Included in long-term debt in the Consolidated Balance Sheets, except for current maturities, which are included in short-term debt.~~

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~6. Investments~~

Net Realized Capital Gains
Three Months Ended June 30, Six Months Ended June 30,
(Before tax) 2018 2017 2018 2017
Gross gains on sales $ 46
$ 77
$ 65
$ 138
Gross losses on sales (31 ) (22 ) (88 ) (68 )
Equity securities [1] 26
—
42
—
Net OTTI losses recognized in earnings —
(2 ) —
(3 )
Transactional foreign currency revaluation —
8
1
14
Non-qualifying foreign currency derivatives 4
(7 ) 1
(14 )
Other, net [2] 7
1
1
12
Net realized capital gains $ 52
$ 55
$ 22
$ 79

~~[1]~~

~~Effective January 1, 2018, with adoption of new accounting guidance for equity securities at fair value, includes~~

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 June 30, 2019, were $29 and $74 for the three and six months ended June 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 June 30, 2018, were $17 and $11 for the three and six months ended June 30, 2018, respectively.


[2]	Includes gains (losses) on non-qualifying derivatives, excluding foreign currency derivatives, of $(6) and $8 ~~and~~ $1, respectively, for the three months ended June 30, ~~2018~~2019 and ~~2017~~2018. For the six months ended June 30, ~~2018~~2019 and ~~2017~~2018, the non-qualifying derivatives, excluding foreign currency derivatives, were $8 and $(2) ~~and~~ $8, respectively.

Net realized capital gains ~~and losses~~(losses) from investment sales are reported as a component of revenues and are determined on a specific identification basis. Before tax, net gains (losses) on sales and impairments previously reported as unrealized gains ~~or losses~~(losses) in AOCI were $50 and $71 for the three and six months ended June 30, 2019, respectively, and $(6) and $(44) for the three and six months ended June 30, 2018, ~~respectively, and $56 and $71 for the three and six months ended June 30, 2017,~~ respectively. Proceeds from the sales of AFS securities totaled ~~$4.2~~$4.6 billion and ~~$8.5~~$8.9 billion for the three and six months ended June 30, ~~2018,~~2019 , respectively, and $4.2 billion and $8.5 billion, for the three and six months ended June 30, ~~2017,~~2018, respectively. ~~Effective January 1, 2018, with adoption of new accounting guidance for equity securities, the proceeds from sales of AFS securities no longer includes 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 June 30, 2018, was $17 for the three months ended June 30, 2018 and $11 for the six months ended June 30, 2018. Prior to January 1, 2018, changes in net unrealized gains (losses) on equity securities were included in AOCI.

Recognition and Presentation of Other-Than-Temporary Impairments

The Company will record an other-than-temporary impairment (“OTTI”) for fixed maturities if the Company intends to sell or it is more likely than not that the Company will be required to sell the security before a recovery in value. A corresponding charge is recorded in net realized capital losses equal to the difference between the fair value and amortized cost basis of the security.

The Company will also record an OTTI for those fixed maturities for which the Company does not expect to recover the entire amortized cost basis. For these securities, the excess of the amortized cost basis over its fair value is separated into the portion representing a credit OTTI, which is recorded in net

realized capital losses, and the remaining non-credit amount,

which is recorded in OCI. The credit OTTI amount is the excess of its amortized cost basis over the Company’s best estimate of discounted expected future cash flows. The non-credit amount is the excess of the best estimate of the discounted expected future cash flows over the fair value. The Company’s best estimate of discounted expected future cash flows becomes the new cost basis and accretes prospectively into net investment income over the estimated remaining life of the security.

Developing the Company’s best estimate of expected future cash flows is a quantitative and qualitative process that incorporates information received from third-party sources along with certain internal assumptions regarding the future performance. The Company's considerations include, but are not limited to, (a) changes in the financial condition of the issuer and the underlying collateral, (b) whether the issuer is current on contractually obligated interest and principal payments, (c) credit ratings, (d) payment structure of the security and (e) the extent to which the fair value has been less than the amortized cost of the security.

For non-structured securities, assumptions include, but are not limited to, economic and industry-specific trends and fundamentals, security-specific developments, industry earnings multiples and the issuer’s ability to restructure and execute asset sales.

For structured securities, assumptions include, but are not limited to, various performance indicators such as historical and projected default and recovery rates, credit ratings, current and projected delinquency rates, loan-to-value ("LTV") ratios, average cumulative collateral loss rates that vary by vintage year, prepayment speeds, and property value declines. These assumptions require the use of significant management judgment and include the probability of issuer default and estimates regarding timing and amount of expected recoveries which may include estimating the underlying collateral value.

Prior to January 1, 2018, the Company recorded an OTTI for certain equity securities with debt-like characteristics if the Company intended to sell or it was more likely than not that the Company was required to sell the security before a recovery in value as well as for those equity securities for which the Company did not expect to recover the entire amortized cost basis. The Company also recorded an OTTI for equity securities where the decline in the fair value was deemed to be other-than-temporary. For further discussion of these policies, see Recognition and Presentation of Other-Than-Temporary Impairments within Note 6 - Investments of Notes to Consolidated Financial Statements included in the Company’s 2017 Form 10-K Annual Report.



Impairments in Earnings by Type
	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Credit impairments	$	—	$	—	$	2	$	—
Intent-to-sell impairments	—		—		—		—
Total impairments	$	—	$	—	$	2	$	—

Impairments in Earnings by Type
Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
Credit impairments $ —
$ 1
$ —
$ 2
Intent-to-sell impairments —
—
—
—
Impairments on equity securities —
1
—
1
Total impairments $ —
$ 2
$ —
$ 3

~~Table of Contents~~

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

~~6. Investments~~ ~~(continued)~~

																									Cumulative Credit Impairments
	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
(Before tax)	2018			2017			2018			2017			2019			2018			2019			2018
Balance as of beginning of period	$	(21	)	$	(99	)	$	(25	)	$	(110	)	$	(18	)	$	(21	)	$	(19	)	$	(25	)
Additions for credit impairments recognized on [1]:
Securities not previously impaired	—			(1		)	—			(1		)	—			—			(2		)	—
Securities previously impaired	—			—			—			(1		)
Reductions for credit impairments previously recognized on:
Securities that matured or were sold during the period	1			1			5			9			—			1			3			5
Securities due to an increase in expected cash flows	—			5			—			9
Balance as of end of period	$	(20	)	$	(94	)	$	(20	)	$	(94	)	$	(18	)	$	(20	)	$	(18	)	$	(20	)


[1]	These additions are included in the net OTTI losses recognized in earnings in the Condensed Consolidated Statements of Operations.

Available-for-Sale Securities

																																																	AFS Securities by Type
	June 30, 2018												December 31, 2017												June 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]			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	$	993	$	4	$	(3	)	$	994	$	—		$	1,119	$	9	$	(2	)	$	1,126	$	—		$	1,010	$	19	$	—		$	1,029	$	—		$	1,272	$	5	$	(1	)	$	1,276	$	—
CDOs	1,091		1		(3		)	1,089		—			1,257		3		—			1,260		—
CLOs																									1,929		4		(8		)	1,925		—			1,455		2		(20		)	1,437		—
CMBS	3,536		31		(73		)	3,494		(4		)	3,304		58		(26		)	3,336		(5		)	3,774		139		(8		)	3,905		(4		)	3,581		35		(64		)	3,552		(5		)
Corporate	13,493		192		(336		)	13,349		—			12,370		490		(56		)	12,804		—			16,078		718		(48		)	16,748		—			13,696		148		(446		)	13,398		—
Foreign govt./govt. agencies	1,149		12		(28		)	1,133		—			1,071		43		(4		)	1,110		—			1,025		48		(1		)	1,072		—			866		7		(26		)	847		—
Municipal	10,678		508		(44		)	11,142		—			11,743		754		(12		)	12,485		—			9,568		710		—			10,278		—			9,972		421		(47		)	10,346		—
RMBS	3,200		48		(41		)	3,207		—			2,985		63		(4		)	3,044		—			4,478		90		(2		)	4,566		—			3,270		44		(35		)	3,279		—
U.S. Treasuries	1,773		35		(22		)	1,786		—			1,763		46		(10		)	1,799		—			1,567		77		(1		)	1,643		—			1,491		41		(15		)	1,517		—
Total fixed maturities, AFS	35,913		831		(550		)	36,194		(4		)	35,612		1,466		(114		)	36,964		(5		)	$	39,429	$	1,805	$	(68	)	$	41,166	$	(4	)	$	35,603	$	703	$	(654	)	$	35,652	$	(5	)
Equity securities, AFS [2]													907		121		(16		)	1,012		—
Total AFS securities	$	35,913	$	831	$	(550	)	$	36,194	$	(4	)	$	36,519	$	1,587	$	(130	)	$	37,976	$	(5	)

Effective January 1, 2018, with the adoption of new accounting standards for financial instruments, equity securities, AFS were reclassified to equity securities at fair value and are excluded from the table above as of ~~June 30, 2018~~.

Estimated maturities may differ from contractual maturities due

~~Table of Contents~~to security call or prepayment provisions. Due to the potential for

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

~~6. Investments~~ ~~(continued)~~

~~Estimated maturities may differ from contractual maturities due to security call or prepayment provisions. Due to the potential for~~ variability in payment speeds (i.e. prepayments or extensions), mortgage-backed and asset-backed securities are not categorized by contractual maturity.

Concentration of Credit Risk

The Company aims to maintain a diversified investment portfolio including issuer, sector and geographic stratification, where

applicable, and has established certain exposure limits, diversification standards and review procedures to mitigate credit risk. The Company had no investment exposure to any credit concentration risk of a single issuer greater than 10% of the Company's stockholders' equity as of June 30, 2019 or December 31, 2018 other than ~~the~~ U.S. government securities and certain U.S. government ~~agencies as of~~ ~~June 30, 2018~~ ~~or December 31, 2017.~~agencies.



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	)

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~6. Investments~~ ~~(continued)~~

[1]Effective January 1, 2018, with the adoption of new accounting guidance for financial instruments, equity securities, AFS were reclassified to equity securities at fair value and are excluded from the table above as of June 30, 2018.

As of June 30, ~~2018,~~2019, AFS securities in an unrealized loss position consisted of ~~2,855~~906 securities, primarily in the corporate ~~and commercial real estate sectors,~~sector, which were depressed primarily due to ~~an increase in interest rates and/or~~ widening of credit spreads since the securities were purchased. As of June 30, ~~2018, 98%~~2019, 96% of these securities were depressed less than 20% of cost or amortized cost. The ~~increase~~decrease in unrealized losses during the six months ended June 30, ~~2018~~2019 was primarily attributable to ~~higher~~lower interest rates and ~~wider~~tighter credit spreads.

Most of the securities depressed for twelve months or more relate to corporate securities ~~structured securities with exposure to commercial real estate, and municipal bonds. Corporate securities and commercial real estate securities~~which were primarily depressed because current market spreads are wider than ~~spreads~~ at the securities' respective purchase dates. ~~Certain municipal bonds were depressed because the securities have long-dated maturities and interest rates have increased since their purchase.~~ The Company neither has an intention

to sell nor does it expect to be required to sell the securities outlined in the preceding discussion.

Mortgage Loans

Mortgage Loan Valuation Allowances

~~Commercial mortgage~~Mortgage loans are considered to be impaired when management estimates that, based upon current information and events, it is probable that the Company will be unable to collect amounts due according to the contractual terms of the loan agreement. The Company reviews mortgage loans on a quarterly basis to identify potential credit losses. Among other factors, management reviews current and projected macroeconomic trends, such as unemployment rates and property-specific factors such as rental

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

rates, occupancy levels, LTV ratios and debt service coverage ratios (“DSCR”). In addition, the Company considers historical, current and projected delinquency rates and property values. Estimates of collectibility require the use of significant

management judgment and include the probability and timing of borrower default and loss severity estimates. In addition, cash flow projections may change based upon new information about the borrower's ability to pay and/or the value of underlying collateral such as changes in projected property value estimates.

For mortgage loans that are deemed impaired, a valuation allowance is established for the difference between the carrying amount and estimated fair value. The mortgage loan's estimated fair value is most frequently the Company's share of the fair value of the collateral but may also be the Company’s share of either (a) the present value of the expected future cash flows discounted at the loan’s effective interest rate or (b) the loan’s observable market price. A valuation allowance may be recorded for an individual loan or for a group of loans that have an LTV ratio of 90% or greater, a low DSCR or have other lower credit quality characteristics. Changes in valuation allowances are recorded in net realized capital gains and losses. Interest income on impaired loans is accrued to the extent it is deemed collectible and the borrowers continue to make payments under the original or restructured loan terms. The Company stops accruing interest income on loans when it is probable that the Company will not receive interest and principal payments according to the contractual terms of the loan agreement. The Company resumes accruing interest income when it determines that sufficient collateral exists to satisfy the full amount of the loan principal and interest payments and when it is probable cash will be received in the foreseeable future. Interest income on defaulted loans is recognized when received.

As of June 30, ~~2018 and December 31, 2017, commercial~~2019, mortgage loans had an amortized cost of $3.6 billion and carrying value of ~~$3.4~~$3.6 billion, with no valuation allowance. As of December 31, 2018, mortgage loans had an amortized cost of $3.7 billion and ~~$3.2~~carrying value of $3.7 billion, ~~respectively,~~ with a valuation allowance of ~~$1 for both periods.~~$1.

As of ~~both~~ June 30, ~~2018 and~~2019, there were no mortgage loans that had a valuation allowance. As of December 31, ~~2017,~~2018, the carrying value of mortgage loans that had a valuation allowance was ~~$24.~~$23. There were no mortgage loans held-for-sale as of June 30, ~~2018~~

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~6. Investments~~ ~~(continued)~~

2019 or December 31, ~~2017.~~2018. As of June 30, ~~2018,~~2019, the Company had no mortgage loans that have had extensions or restructurings other than what is allowable under the original terms of the contract.

The following table presents the activity within the Company’s valuation allowance for mortgage loans. These loans have been evaluated both individually and collectively for impairment. Loans evaluated collectively for impairment are immaterial.



Valuation Allowance Activity
	2019			2018
Balance, as of January 1	$	(1	)	$	(1	)
Reversals	1			—
Deductions	—			—
Balance, as of June 30	$	—		$	(1	)

Valuation Allowance Activity
2018 2017
Balance, as of January 1 $ (1 ) $ —
Reversals —
—
Deductions —
—
Balance, as of June 30 $ (1 ) $ —

The weighted-average LTV ratio of the Company’s ~~commercial~~ mortgage loan portfolio was ~~51%~~52% as of June 30, ~~2018,~~2019, while the weighted-average LTV ratio at origination of these loans was ~~62%~~61%. LTV

ratios compare the loan amount to the value of the underlying property collateralizing the loan. The loan collateral values are updated no less than annually through reviews of the underlying properties. Factors considered in estimating property values include, among other things, actual and expected property cash flows, geographic market data and the ratio of the property's net operating income to its value. DSCR compares a property’s net operating income to the borrower’s principal and interest payments. As of June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the Company held no delinquent commercial mortgage loans past due by 90 days or more.

Commercial Mortgage Loans Credit Quality

Mortgage Loans Credit Quality

June 30, 2018

December 31, 2017

June 30, 2019

December 31, 2018

Loan-to-value

Carrying Value

Avg. Debt-Service Coverage Ratio

Carrying Value

Avg. Debt-Service Coverage Ratio

Carrying Value

Avg. Debt-Service Coverage Ratio

Carrying Value

Avg. Debt-Service Coverage Ratio

Greater than 80%

—

0.00x

1.27x

65% - 80%

361

1.63x

265

1.95x

404

1.70x

386

1.60x

Less than 65%

2,994

2.76x

2,892

2.76x

3,208

2.56x

3,318

2.59x

Total commercial mortgage loans

3,355

2.68x

3,175

2.69x

Total mortgage loans

3,612

2.47x

3,704

2.49x

																	Mortgage Loans by Region
	June 30, 2018				December 31, 2017				June 30, 2019				December 31, 2018
	Carrying Value		Percent of Total		Carrying Value		Percent of Total		Carrying Value		Percent of Total		Carrying Value		Percent of Total
East North Central	$	251	7.5	%	$	251	7.9	%	$	250	6.9	%	$	250	6.8	%
Middle Atlantic	271		8.1	%	272		8.6	%	268		7.4	%	270		7.3	%
Mountain	31		0.9	%	31		1.0	%	33		0.9	%	30		0.8	%
New England	291		8.7	%	293		9.2	%	346		9.7	%	330		8.9	%
Pacific	803		23.9	%	760		23.9	%	884		24.5	%	917		24.8	%
South Atlantic	691		20.6	%	710		22.4	%	742		20.5	%	712		19.2	%
West North Central	148		4.4	%	149		4.7	%	121		3.3	%	148		4.0	%
West South Central	383		11.4	%	278		8.7	%	407		11.3	%	420		11.3	%
Other [1]	486		14.5	%	431		13.6	%	561		15.5	%	627		16.9	%
Total mortgage loans	$	3,355	100.0	%	$	3,175	100.0	%	$	3,612	100.0	%	$	3,704	100.0	%


[1]	Primarily represents loans collateralized by multiple properties in various regions.

Mortgage Loans by Property Type
June 30, 2018 December 31, 2017
Carrying Value Percent of Total Carrying
Value Percent of Total
Commercial
Industrial $ 964
28.7 % $ 817
25.7 %
Multifamily 1,022
30.5 % 1,006
31.7 %
Office 762
22.7 % 751
23.7 %
Retail 363
10.8 % 367
11.5 %
Other 244
7.3 % 234
7.4 %
Total mortgage loans $ 3,355
100.0 % $ 3,175
100.0 %
THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



Mortgage Loans by Property Type
	June 30, 2019				December 31, 2018
	Carrying Value		Percent of Total		Carrying Value		Percent of Total
Commercial
Industrial	$	1,000	27.7	%	$	1,108	29.9	%
Multifamily	1,156		32.0	%	1,138		30.7	%
Office	691		19.2	%	708		19.1	%
Retail	409		11.3	%	392		10.6	%
Single Family	81		2.2	%	82		2.2	%
Other	275		7.6	%	276		7.5	%
Total mortgage loans	$	3,612	100.0	%	$	3,704	100.0	%

Mortgage Servicing

The Company originates, sells and services commercial mortgage loans on behalf of third parties and recognizes servicing ~~fees~~fee income over the period that services are performed. As of June 30, ~~2018,~~2019, under this program, the Company serviced ~~commercial~~ mortgage loans with a total outstanding principal of ~~$5.7~~$5.9 billion, of which $3.5 billion was serviced on behalf of third parties and ~~$2.2~~$2.4 billion was retained and reported in total investments on the Company's Condensed Consolidated Balance Sheets . As of December 31, ~~2017,~~2018, the Company serviced ~~commercial~~ mortgage loans with a total outstanding principal balance of ~~$1.3~~$6.0 billion, of which ~~$402~~$3.6 billion was serviced on behalf of third parties ~~$566~~and $2.4 billion was retained and reported in total investments ~~and $356 was reported in assets held for sale~~ on the Company's Condensed Consolidated Balance Sheets. Servicing rights are carried at the lower of cost or fair value and were zero as of June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, because servicing fees were market-level fees at origination and remain adequate to compensate the Company for servicing the loans.

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~6. Investments~~ ~~(continued)~~

Variable Interest Entities

The Company is engaged with various special purpose entities and other entities that are deemed to be VIEs primarily as an investor through normal investment activities but also as an investment manager.

A VIE is an entity that either has investors that lack certain essential characteristics of a controlling financial interest, such as simple majority kick-out rights, or lacks sufficient funds to finance its own activities without financial support provided by other entities. The Company performs ongoing qualitative assessments of its VIEs to determine whether the Company has a controlling financial interest in the VIE and therefore is the primary beneficiary. The Company is deemed to have a controlling financial interest when it has both the ability to direct the activities that most significantly impact the economic performance of the VIE and the obligation to absorb losses or right to receive benefits from the VIE that could potentially be significant to the VIE. Based on the Company’s assessment, if it determines it is the primary beneficiary, the Company consolidates the VIE in the Company’s Condensed Consolidated Financial Statements.

Consolidated VIEs

As of June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the Company did not hold any securities for which it is the primary beneficiary.

~~Non-Consolidated~~Non-consolidated VIEs

The Company, through normal investment activities, makes passive investments in limited partnerships and other alternative investments. For these non-consolidated VIEs, the Company has determined it is not the primary beneficiary as it has no ability to direct activities that could significantly affect the economic performance of the investments. The Company’s maximum exposure to loss as of June 30, ~~2018~~2019 and December 31, ~~2017~~2018 was limited to the total carrying value of ~~$940~~$1.1 billion and ~~$920,~~$1.0 billion, respectively, which are included in limited partnerships and other alternative investments in the Company's Condensed Consolidated Balance Sheets. As of June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the Company has outstanding commitments totaling ~~$733~~$797 and ~~$787,~~$718, respectively, whereby the Company is committed to fund these investments and may be called by the partnership during the commitment period to fund the purchase of new investments and partnership expenses. These investments are generally of a passive nature in that the Company does not take an active role in management. For further discussion of these investments, see Equity Method Investments within Note 6 - Investments of Notes to Consolidated Financial Statements included in the Company’s ~~2017~~2018 Form 10-K Annual Report.

In addition, the Company also makes passive investments in structured securities issued by VIEs for which the Company is not the manager. These investments ~~are included in~~include ABS, ~~CDOs,~~CLOs, CMBS and RMBS and are reported in ~~the Available-for-Sale Securities table~~fixed maturities, available-for-sale, and fixed maturities, ~~AFS and~~ FVO, in the Company’s Condensed Consolidated Balance Sheets. The Company has not provided financial or other support with respect to these investments other than its original investment. For these investments, the Company determined it is not the primary beneficiary due to the relative size of the Company’s investment in comparison to the

principal amount of the structured securities issued by the VIEs, the level of credit subordination which reduces the Company’s obligation to absorb losses or right to receive benefits and the Company’s inability to direct the activities that most significantly impact the economic performance of the VIEs. The Company’s maximum exposure to loss on these investments is limited to the amount of the Company’s investment.

Securities Lending, Repurchase Agreements, and Other Collateral Transactions and Restricted Investments

The Company enters into securities financing transactions as a way to earn additional income or manage liquidity, primarily through securities lending and repurchase agreements.

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



Payables for Collateral on Investments
	June 30, 2019		December 31, 2018
	Fair Value		Fair Value
Securities Lending Transactions:
Gross amount of securities on loan	$	585	$	820
Gross amount of associated liability for collateral received [1]	$	599	$	840

Repurchase agreements:
Gross amount of recognized liabilities for repurchase agreements	$	154	$	72
Gross amount of collateral pledged related to repurchase agreements [2]	$	158	$	73
Gross amount of recognized receivables for reverse repurchase agreements	$	54	$	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 $18 and $3 which are excluded from the Company's Condensed Consolidated Balance Sheets as of June 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.

Securities Lending

Under a securities lending program, the Company lends certain fixed maturities within the corporate, foreign government/government agencies, and municipal sectors as well as equity securities to qualifying third-party borrowers in return for collateral in the form of cash or securities. For domestic and non-domestic loaned securities, respectively, borrowers provide collateral of 102% and 105% of the fair value of the securities lent at the time of the loan. Borrowers will return the securities to the Company for cash or securities collateral at maturity dates generally of 90 days or less. Security collateral on deposit from counterparties in connection with securities lending transactions may not be sold or re-pledged, except in the event of default by the counterparty, and is not reflected on the Company’s Condensed Consolidated Balance Sheets. Additional collateral is obtained if the fair value of the collateral falls below 100% of the fair value of the loaned securities. The agreements are continuous and do not have stated maturity dates and provide the counterparty the right to sell or re-pledge the securities loaned. If cash, rather than securities, is received as collateral, the cash is typically invested in short-term investments or fixed maturities and is reported as an asset on the Company's Condensed Consolidated Balance Sheets. Income associated with securities lending transactions is reported as a component of net investment income in the Company’s Condensed Consolidated Statements of Operations.

Repurchase Agreements

From time to time, the Company enters into repurchase agreements to manage liquidity or to earn incremental income. A repurchase agreement is a transaction in which one party (transferor) agrees to sell securities to another party (transferee) in return for cash (or securities), with a simultaneous agreement to repurchase the same securities at a specified price at a later date. ~~These~~The maturity of these transactions is generally ~~have a contractual maturity of~~ ninety days or less. Repurchase agreements include master netting provisions

that provide both counterparties the right to offset claims and apply securities held by them with respect to their obligations in the event of a default. Although the Company has the contractual right to offset claims, the Company's current positions do not meet the specific conditions for net presentation.

Under repurchase agreements, the Company transfers collateral of U.S. government and government agency securities and

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~6. Investments~~ ~~(continued)~~

receives cash. For repurchase agreements, the Company obtains cash in an amount equal to at least 95% of the fair value of the securities transferred. The agreements require additional collateral to be transferred when necessary and provide the counterparty the right to sell or re-pledge the securities transferred. The cash received from the repurchase program is typically invested in short-term investments or fixed maturities and is reported as an asset on the Company's Condensed Consolidated Balance Sheets. The Company accounts for the repurchase agreements as collateralized borrowings. The securities transferred under repurchase agreements are included in fixed maturities, AFS with the obligation to repurchase those securities recorded in other liabilities on the Company's Condensed Consolidated Balance Sheets.

From time to time, the Company enters into reverse repurchase agreements where the Company purchases securities and simultaneously agrees to resell the same or substantially the same securities. The maturity of these transactions is generally within one year. The agreements require additional collateral to be transferred to the Company when necessary and the Company has the right to sell or re-pledge the securities received. The Company accounts for reverse repurchase agreements as collateralized financing. The receivable for reverse repurchase agreements is included within short-term investments in the Company's Condensed Consolidated Balance Sheets.

Securities Lending and Repurchase Agreements
June 30, 2018 December 31, 2017
Fair Value Fair Value
Securities Lending Transactions:
Gross amount of securities on loan $ 687
$ 922
Gross amount of associated liability for collateral received [1] $ 704
$ 945

Repurchase agreements:
Gross amount of recognized liabilities for repurchase agreements $ 165
$ 174
Gross amount of collateral pledged related to repurchase agreements [2] $ 170
$ 176


~~[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 $9 ~~and $~~0 ~~million which are excluded from the Company's Condensed Consolidated Balance Sheets as of~~ ~~June 30, 2018~~ ~~and~~ ~~December 31, 2017, respectively.~~


~~[2]~~	~~Collateral pledged is included within fixed maturities, AFS and short term investments in the Company's Condensed Consolidated Balance Sheets.~~

Other Collateral Transactions

The Company is required by law to deposit securities with government agencies in certain states in which it conducts business. As of June 30, 2018 and December 31, 2017, the fair value of securities on deposit was $2.6 billion and $2.5 billion, respectively.

As of June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the Company pledged collateral of ~~$46~~$36 and ~~$104,~~$47, respectively, of U.S. government securities and ~~government agency~~municipal securities or cash primarily related to certain bank loan participations committed to through a limited partnership agreement. These amounts also include collateral related to letters of credit.

For disclosure of collateral in support of derivative transactions, refer to the Derivative Collateral Arrangements section ofin Note 7 - ~~Derivative Instruments~~Derivatives of Notes to Condensed Consolidated Financial Statements. For disclosure of collateral in support of credit facilities, refer to Note 10 - Debt of Notes to Condensed Consolidated Financial Statements.

Other Restricted Investments

The Company is required by law to deposit securities with government agencies in certain states in which it conducts business. As of June 30, 2019 and December 31, 2018, the fair value of securities on deposit was $2.4 billion and $2.2 billion, respectively.

In addition, as of June 30, 2019, the Company held fixed maturities and short-term investments of $489 and $1, respectively in trust for the benefit of syndicate policyholders and other investments of $49 primarily consisting of overseas deposits in various countries with Lloyd's to support underwriting activities in those countries.

~~Table of Contents~~

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

~~7. Derivative Instruments~~

7. DERIVATIVES

The Company utilizes a variety of OTC, OTC-cleared and exchange traded derivative instruments as a part of its overall risk management strategy as well as to enter into replication transactions. Derivative instruments are used to manage risk associated with interest rate, equity market, credit spread, issuer default, price, and currency exchange rate risk or volatility. Replication transactions are used as an economical means to synthetically replicate the characteristics and performance of assets that are permissible investments under the Company’s investment policies.

Strategies that Qualify for Hedge Accounting

Some of the Company's derivatives satisfy hedge accounting requirements as outlined in Note 1 - Basis of Presentation and Significant Accounting Policies of Notes to Consolidated Financial Statements, included in The Hartford’s ~~2017~~2018 Form 10-K Annual Report. Typically, these hedging instruments include interest rate swaps and, to a lesser extent, foreign currency swaps where the terms or expected cash flows of the hedged item closely match the terms of the swap. The interest rate swaps are typically used to manage interest rate duration of certain fixed maturity securities. The hedge strategies by hedge accounting designation include:

Cash Flow Hedges

Interest rate swaps are predominantly used to manage portfolio duration and better match cash receipts from assets with cash disbursements required to fund liabilities. These derivatives primarily convert interest receipts on floating-rate fixed maturity securities to fixed rates. The Company has also entered into interest rate swaps to convert the variable interest payments on the 3 month Libor + 2.125% junior subordinated debt to fixed interest payments. For further information, see the Junior Subordinated Debentures section within Note 13 - Debt of Notes to the Consolidated Financial Statements, included in The Hartford's ~~2017~~2018 Form 10-K Annual Report.

Foreign currency swaps are used to convert ~~foreign currency-denominated~~non-U.S. denominated cash flows related to certain investment receipts to U.S. dollars in order to reduce cash flow fluctuations due to changes in currency rates.

The Company also previously entered into forward starting swap agreements to hedge the interest rate exposure related to the future purchase of fixed-rate securities, primarily to hedge interest rate risk inherent in the assumptions used to price certain group benefits liabilities.

Non-qualifying Strategies

Derivative relationships that do not qualify for hedge accounting (“non-qualifying strategies”) primarily include hedging and replication strategies that utilize credit default swaps. In addition, hedges of interest rate, foreign currency and equity risk of certain fixed maturities and equities do not qualify for hedge accounting. The non-qualifying strategies include:

Credit Contracts

Credit default swaps are used to purchase credit protection on an individual entity or referenced index to economically hedge against default risk and credit-related changes in the value of fixed maturity securities. Credit default swaps are also used to assume credit risk related to an individual entity or referenced index as a part of replication transactions. These contracts require the Company to pay or receive a periodic fee in exchange for compensation from the counterparty should the referenced security issuers experience a credit event, as defined in the contract. The Company also enters into credit default swaps to terminate existing credit default swaps, thereby offsetting the changes in value of the original swap going forward.

Interest Rate Swaps, Swaptions and Futures

The Company uses interest rate swaps, swaptions and futures to manage interest rate duration between assets and liabilities in certain investment portfolios. In addition, the Company enters into interest rate swaps to terminate existing swaps, thereby offsetting the changes in value of the original swap going forward. As of June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the notional amount of interest rate swaps in offsetting relationships was ~~$8.1~~$7.6 billion and ~~$7.3~~$7.1 billion, respectively.

Foreign Currency Swaps and Forwards

The Company enters into foreign currency swaps to convert the foreign currency exposures of certain ~~foreign currency-denominated~~non-U.S. dollar denominated fixed maturity investments to U.S. dollars. The Company may at times enter into foreign currency forwards to hedge non-U.S. dollar denominated cash ~~and, previously,~~or equity securities. The Company previously entered into foreign currency forwards to hedge currency impacts on changes in equity of the U.K. property and casualty run-off subsidiaries that were sold in May 2017. For further information on the disposition, see Note 2 - Business Acquisitions of Notes to Consolidated Financial Statements, included in The Hartford's 2017 Form 10-K Annual Report.

Equity Index Options

The Company enters into equity index options to hedge the impact of a decline in the equity markets on the investment portfolio. The Company also enters into call options on equity securities to generate additional return.

Derivative Balance Sheet Classification

For reporting purposes, the Company has elected to offset within assets or liabilities based upon the net of the fair value amounts, income accruals, and related cash collateral receivables and payables of OTC derivative instruments executed in a legal entity and with the same counterparty under a master netting agreement, which provides the Company with the legal right of offset. The following fair value amounts do not include income accruals or related cash collateral receivables and payables, which are netted with derivative fair value amounts to determine balance sheet presentation. The Company’s derivative

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~7. Derivative Instruments~~ ~~(continued)~~

instruments are held for risk management purposes, unless otherwise noted in the following table. The notional amount of derivative contracts represents the basis upon which pay or receive amounts are calculated and is presented in the table to

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

quantify the volume of the Company’s derivative activity. Notional amounts are not necessarily reflective of credit risk.

Offsetting of Derivative Assets/Liabilities

The following tables present the gross fair value amounts, the amounts offset, and net position of derivative instruments eligible for offset in the Company's Condensed Consolidated Balance Sheets. Amounts offset include fair value amounts, income

accruals and related cash collateral receivables and payables associated with derivative instruments that are traded under a common master netting agreement, as described in the preceding discussion. Also included in the tables are financial collateral receivables and payables, which are contractually permitted to be offset upon an event of default, although are disallowed for offsetting under U.S. GAAP.

~~Table of Contents~~

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

~~7. Derivative Instruments~~ ~~(continued)~~



Offsetting Derivative Assets and Liabilities
	(i)			(ii)			(iii) = (i) - (ii)						(iv)			(v) = (iii) - (iv)
							Net Amounts Presented in the Statement of Financial Position						Collateral Disallowed for Offset in the Statement of Financial Position
	Gross Amounts of Recognized Assets (Liabilities)			Gross Amounts Offset in the Statement of Financial Position			Derivative Assets [1] (Liabilities) [2]			Accrued Interest and Cash Collateral (Received) [3] Pledged [2]			Financial Collateral (Received) Pledged [4]			Net Amount
As of June 30, 2019
Other investments	$	30		$	26		$	11		$	(7	)	$	1		$	3
Other liabilities	$	(90	)	$	(15	)	$	(71	)	$	(4	)	$	(68	)	$	(7	)
As of December 31, 2018
Other investments	$	31		$	26		$	7		$	(2	)	$	2		$	3
Other liabilities	$	(92	)	$	(20	)	$	(68	)	$	(4	)	$	(65	)	$	(7	)

Cash Flow Hedges

For derivative instruments that are designated and qualify as cash flow hedges, the ~~effective portion of the~~ gain or loss on the derivative is reported as a component of OCI and reclassified into earnings in the same

period or periods during which the hedged transaction affects ~~earnings. Gains and losses on the derivative representing hedge ineffectiveness are recognized in current period~~ earnings. All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.

Derivatives in Cash Flow Hedging Relationships
Gain (Loss) Recognized in OCI on Derivative (Effective Portion)
Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
Interest rate swaps $ (2 ) $ 17
$ (16 ) $ 14
Foreign currency swaps 8
(4 ) 1
(4 )
Total $ 6
$ 13
$ (15 ) $ 10

Gain (Loss) Reclassified from AOCI into Income (Effective Portion)
Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018
2017
Interest rate swaps
Net realized capital gains $ —
$ 1
$ 1
$ 5
Net investment income 9
10
17
19
Total $ 9
$ 11
$ 18
$ 24

~~During the three and six months ended~~ As of June 30, ~~2018, and~~ ~~June 30, 2017~~2019, the Company had ~~no ineffectiveness recognized in income within net realized capital gains (losses).~~

As$18 of~~June 30, 2018, the~~ before tax deferred net gains on derivative instruments recorded in AOCI

that are expected to be reclassified to earnings during the next twelve ~~months are~~ ~~$26~~.months. This expectation is based on the anticipated ~~interest payments on hedged investments in fixed maturity securities that will occur~~

~~Table of Contents~~

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

~~7. Derivative Instruments~~ ~~(continued)~~

interest payments on hedged investments in fixed maturity securities that will occur over the next twelve months, at which time the Company will recognize the deferred net gains (losses) as an adjustment to net investment income over the term of the investment cash flows.

During the three and six months ended June 30, ~~2018,~~2019 and ~~June 30, 2017~~,2018, the Company had no net reclassifications from AOCI to earnings resulting from the discontinuance of cash-flow hedges due to forecasted transactions that were no longer probable of ~~occurring.~~

~~Non-Qualifying~~occurring.

Non-qualifying Strategies

For non-qualifying strategies, including embedded derivatives that are required to be bifurcated from their host contracts and accounted for as derivatives, the gain or loss on the derivative is recognized currently in earnings within net realized capital gains (losses).

Credit Risk Assumed through Credit Derivatives

The Company enters into credit default swaps that assume credit risk of a single entity or referenced index in order to synthetically replicate investment transactions that are permissible under the Company's investment policies. The Company will receive periodic payments based on an agreed upon rate and notional amount and will only make a payment if there is a credit event. A credit event payment will typically be equal to the notional value of the swap contract less the value of the referenced security

issuer’s debt obligation after the occurrence of the credit event. A credit event is generally defined as a default on contractually obligated interest or principal payments or bankruptcy of the referenced entity. The credit default swaps in which the Company assumes credit risk primarily reference investment grade single corporate issuers and baskets, which include standard diversified portfolios of corporate and CMBS issuers. The diversified portfolios of corporate issuers are established within sector concentration limits and may be divided into tranches that possess different credit ratings.

~~Table of Contents~~

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

~~7. Derivative Instruments~~ ~~(continued)~~

Derivative Collateral Arrangements

The Company enters into various collateral arrangements in connection with its derivative instruments, which require both the pledging and accepting of collateral. As of June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the Company pledged cash collateral with a fair value of less than $1 and $4, respectively, associated with derivative instruments. The collateral receivable has been recorded in other assets or other liabilities on the Company's Condensed Consolidated Balance Sheets as determined by the Company's election to offset on the balance sheet. As of June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the Company also pledged securities collateral associated with derivative instruments with a fair value of ~~$72~~$73 and ~~$101,~~$67, respectively, which have been included in ~~fixed maturities on the~~

Condensed Consolidated Balance Sheets. In addition, as of June 30, 2018 and December 31, 2017, the Company has also pledged initial margin of securities related to OTC- cleared and exchange traded derivatives with a fair value of $84 and $96, respectively, which are included within fixed maturities on the Company's Condensed Consolidated Balance Sheets. The counterparties generally have the right to sell or re-pledge these securities.

In addition, as of June 30, 2019 and December 31, 2018, the

Company has pledged initial margin of securities related to OTC-cleared and exchange traded derivatives with a fair value of $85 and $89, respectively, which are included within fixed maturities on the Company's Condensed Consolidated Balance Sheets.

As of June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the Company accepted cash collateral associated with derivative instruments of $11 and $9, respectively, which was invested and recorded in the Company's Condensed Consolidated Balance Sheets in fixed maturities and short-term investments with corresponding amounts recorded in other investments or other liabilities as determined by the Company's election to offset on the balance sheet. The Company

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~7. Derivative Instruments~~ ~~(continued)~~

also accepted securities collateral as of June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, with a fair value of $4$2 and ~~$2, none of~~$5, respectively, which the Company has the ~~ability~~right to sell or repledge. As of June 30, ~~2018~~2019 and December 31, ~~2017,~~2018 , the Company had no repledged ~~securities and~~securities. During the same periods, the Company did not sell any securities held as collateral. ~~In addition, as~~As of June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, non-cash collateral accepted was held in separate custodial accounts and was not included in the Company’s Consolidated Balance Sheets.

~~Table of Contents~~

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

~~8. Other Intangible Assets~~

On February 16, 2018, The Company entered into a renewal rights agreement with Farmers Exchanges of the Farmers Group of Companies to acquire its Foremost-branded small commercial business sold through independent agents. In connection with the renewal rights agreement, the Company recorded a customer relationships intangible asset of $46 which will be amortized over 10 years.

Property and Casualty Insurance Products

Rollforward of ~~Contents~~Liabilities for Unpaid Losses and Loss Adjustment Expenses

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

~~9. Reserve for Unpaid Losses and Loss Adjustment Expenses~~

~~Property and Casualty Insurance Products~~

Unfavorable (Favorable) Prior Accident Year Development


	For the six months ended June 30,						For the six months ended June 30,
	2018			2017			2019			2018
Workers’ compensation	$	(73	)	$	(20	)	$	(50	)	$	(73	)
Workers’ compensation discount accretion	20			16			17			20
General liability	28			10			43			28
Marine							10			—
Package business	(7		)	—			(9		)	(7		)
Commercial property	(12		)	(6		)	(15		)	(12		)
Professional liability	8			—			33			8
Bond	—			(10		)	—			—
Assumed Reinsurance							3			—
Automobile liability - Commercial Lines	(10		)	20			2			(10		)
Automobile liability - Personal Lines	—			—			(5		)	—
Homeowners	(13		)	—			1			(13		)
Net asbestos reserves	—			—			—			—
Net environmental reserves	—			—			—			—
Catastrophes	(34		)	(13		)	(22		)	(34		)
Uncollectible reinsurance	11			—			—			11
Other reserve re-estimates, net	3			5			16			3
Total prior accident year development	$	(79	)	$	2		$	24		$	(79	)

Re-estimates of prior accident year reserves for the six months ended June 30, ~~2018~~2019

Workers’ compensation reserveswere reduced, principally in small commercial driven by lower than previously estimated claim severity for the 2014 through 2017 accident years.

General liability reserves were increased, primarily due to reserve increases in small commercial for accident years 2017 and 2018 due to higher frequency of high-severity bodily injury claims, as well as increased estimated severity on the acquired Navigators book of business related to U.S. construction, premises liability, products liability and excess casualty, mostly related to accident years 2014 to 2018.

Package business reserveswere decreased, primarily due to favorable emergence on property claims related to accident years 2016 through 2018.

Commercial property reserveswere decreased, principally due to favorable emergence of reported losses, including on the acquired Navigators Group book of business related to offshore energy in accident years 2017 to 2018 and construction engineering across accident years 2015 to 2018.

Professional liability reserveswere increased, primarily due to large loss activity, including wrongful termination

and discrimination claims, in accident years 2017 and 2018 and increased estimated frequency and severity of directors’ and officers’ reserves on the Navigators Group book of business, principally for the 2014 to 2018 accident years.

Marine reserveswere increased, principally related to pollution exposure from the 1980s and 1990s related to the Navigators Group book of business.

Automobile liability reserveswere reduced, primarily driven by the emergence of lower estimated severity in personal automobile liability for accident year 2017.

Catastrophes reserves were reduced, primarily as a result of lower estimated net losses from 2017 hurricanes Harvey and Irma.

Re-estimates of prior accident year reserves for thesix months endedJune 30, 2018

Workers’ compensation reserveswere reduced in small commercial and middle market, primarily for accident years 2011 to 2015, as both claim frequency and medical claim severity have emerged favorably compared to previous reserve estimates.

General liability reserveswere increased, primarily due to an increase in reserves for higher hazard general liability exposures in middle market for accident years 2009 to 2017, partially offset by a decrease in reserves for other lines within middle market, including premises and operations, umbrella and products liability, principally for accident years 2015 and prior. Contributing to the increase in reserves for higher hazard general liability exposures was an increase in large losses and, in more recent accident years, an increase in claim frequency. Contributing to the reduction in reserves for other middle market lines were more favorable outcomes due to initiatives to reduce legal expenses. In addition, reserve increases for claims with lead paint exposure were offset by reserve decreases for other mass torts and extra-contractual liability claims.

Commercial property reserves were reduced, driven by an increase in estimated reinsurance recoverables on middle market property losses from the 2017 accident year.

Automobile liability reserves were reduced, primarily driven by reduced estimates of loss adjustment expenses in small commercial for recent accident years.

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~9. Reserve for Unpaid Losses and Loss Adjustment Expenses~~ ~~(continued)~~

Homeowners reserveswere reduced, primarily in accident years 2013 to 2017, driven by lower than expected severity across multiple perils.

Catastrophe reserves were reduced, primarily as a result of lower estimated net losses from 2017 catastrophes, principally related to hurricanes Harvey and Irma. Before reinsurance, estimated losses for 2017 catastrophe events decreased by $123 in the six months ended June 30, 2018, resulting in a decrease in reinsurance recoverables of $90 as the Company no longer expects to recover under the 2017 Property Aggregate reinsurance treaty as aggregate ultimate losses for 2017 catastrophe events are now projected to be less than $850.

~~Re-estimates of prior accident year reserves for thesix months endedJune 30, 2017~~

~~Workers’ compensation reserves~~in small commercial were reduced given the continued emergence of favorable frequency for accident years 2013 to 2015. Management has placed additional weight on this favorable experience as it becomes more credible.

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

~~General liability reserves~~ ~~were in~~creased for the 2013 to 2016 accident years on a class of business that insures service and maintenance contractors. This increase was partially offset by a decrease in recent accident year reserves for other middle market general liability reserves.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

~~Bond business reservesrelated to recent accident years were reduced, as reported losses for commercial and contract surety have emerged favorably.~~

~~Automobile liability reserves~~ ~~within Commercial Lines were~~ ~~increased in small commercial and large national accounts for the 2013 to 2016 accident years, driven by higher frequency of more severe accidents, including litigated claims.~~

~~Catastrophe reserves~~ ~~were reduced primarily due to lower estimates of 2016 wind and hail event losses and a decrease in losses on a 2015 wildfire~~.

Group Life, Disability and Accident Products

Re-estimates of prior incurral years reserves for the six months ended June 30, 2019

Group disability-Prior period reserve estimates decreased by approximately $175 largely driven by group long-term disability claim incidence lower than prior assumptions, as well as claim recoveries and Social Security Disability approvals higher than prior reserve assumptions. New York paid family leave also experienced favorable claim emergence compared to year-end estimates.

Group life and accident (including group life premium waiver)-Prior period reserve estimates decreased by approximately $25 largely driven by lower-than-previously expected claim incidence in group life premium waiver.

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~9. Reserve for Unpaid Losses and Loss Adjustment Expenses~~ ~~(continued)~~

Re-estimates of prior incurral years reserves for the six months ended June 30, 2018

Group disability-Prior period reserve estimates decreased by approximately $150 largely driven by group long-term disability claim recoveries higher than prior reserve assumptions and claim incidence lower than prior assumptions. Short-term disability has also experienced favorable claim recoveries.

Group life and accident (including group life premium waiver)-Prior period reserve estimates decreased by approximately $65 largely driven by lower-than-previously expected claim incidence inclusive of group life, group life premium waiver, and group accidental death & dismemberment.

~~Re-estimates of prior incurral years reserves for the six months ended June 30, 2017~~

~~Group disability-~~Prior period reserve estimates decreased by approximately $65 largely driven by group long-term disability claim recoveries higher than prior reserve assumptions. This favorability was partially reduced by lower expectation of future benefit offsets, particularly lower Social Security disability income approval rates and longer decision turnaround times in the Social Security Administration.

~~Group life and accident (including group life premium waiver)-~~Prior period reserve estimates decreased by approximately $45 largely driven by lower than previously expected claim incidence in group life and group life premium waiver and lower than expected severity on group accidental death & dismemberment.

9. RESERVE FOR FUTURE POLICY BENEFITS

~~Table of Contents~~



Changes in Reserves for Future Policy Benefits^[1]
Liability balance, as of January 1, 2019	$	642
Incurred	44
Paid	(55		)
Change in unrealized investment gains and losses	13
Liability balance, as of June 30, 2019	$	644
Reinsurance recoverable asset, as of January 1, 2019	$	27
Incurred	—
Paid	—
Reinsurance recoverable asset, as of June 30, 2019	$	27

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

~~10. Reserve for Future Policy Benefits~~



Liability balance, as of January 1, 2018	$	713
Incurred	14
Paid	(19		)
Change in unrealized investment gains and losses	(40		)
Liability balance, as of June 30, 2018	$	668
Reinsurance recoverable asset, as of January 1, 2018	$	26
Incurred	9
Paid	—
Reinsurance recoverable asset, as of June 30, 2018	$	35

[1]Reserves for future policy benefits includes paid-up life insurance and whole-life policies resulting from conversion from group life policies included within the Group Benefits segment and reserves for run-off structured settlement and terminal funding agreement liabilities which are in the Corporate category.

Senior Notes

On ~~March~~January 15, ~~2018,~~2019, The Hartford ~~issued $500~~repaid at maturity the $413 principal amount of ~~4.4%~~its 6.0% senior notes.

In the Navigators Group acquisition, the Company assumed $265 par value 5.75% Senior notes ~~("4.4% Notes")~~ due ~~March~~on October 15, ~~2048 for net proceeds~~2023 with a fair value of $284 as of the acquisition date. The effective interest rate on the 5.75% Senior notes is approximately ~~$490, after deducting underwriting discounts and expenses from the offering.~~4.00%. Interest is payable ~~semi-annually in arrears on March~~each April 15 and ~~September 15, commencing September 15, 2018.~~October 15. The ~~Hartford,~~interest rate payable on the 5.75% Senior notes is subject to a tiered adjustment based on the Navigators Group’s debt rating triggering if Navigators Group's rating falls to below investment grade. The Navigators Group, at its option, can redeem the ~~4.4%~~5.75% Senior Notes at any time, in whole or in part, at a redemption price equal to the greater of 100% of the principal amount being redeemed or a make-whole amount based on a comparable maturity USU.S. Treasury plus 2550 basis points, plus any accrued and unpaid ~~interest, except the option of a make-whole payment is not applicable within the final six months before maturity.~~interest.

Shelf Registrations

On ~~March 15, 2018,~~May 17, 2019, the Company filed with the Securities and Exchange Commission (the “SEC”) an automatic shelf registration statement (Registration No. 333-231592) for the potential offering and sale of debt and equity securities. The registration statement allows for the following types of securities to be offered: debt securities, junior subordinated debt securities, guarantees, preferred stock, common stock, depositary shares, warrants, stock purchase contracts, and stock purchase units. In that The Hartford ~~repaid at maturity~~is a well-known seasoned issuer, as defined in Rule 405 under the ~~$320 principal~~Securities Act of 1933, the registration

statement went effective immediately upon filing and The Hartford may offer and sell an unlimited amount of ~~its 6.3% senior notes.~~securities under the registration statement during the three-year life of the registration statement.

~~Junior Subordinated Debentures~~Lloyd's Letter of Credit Facilities

~~On June 15, 2018,~~As a result of the acquisition of Navigators Group, The Hartford ~~completed its previously announced redemption~~assumed three existing letter of ~~$500 aggregate principal amount~~credit facility agreements: the Club Facility, the Bilateral Facility, and the Australian Dollar Facility. Letters of ~~its 8.125% Fixed-to-Floating Rate Junior Subordinated Debentures due 2068. During~~credit under the ~~initial offering~~Club and Bilateral Facilities are used to provide a portion of the ~~8.125% debentures, the Company entered into a replacement~~ capital ~~covenant ("RCC"), and under the terms~~requirements at Lloyd's. As of ~~the RCC, if the Company redeemed the 8.125% debentures at any time prior to~~ June 15, 2048 it could only do so with the proceeds from the sale of certain qualifying replacement securities. The 3 month Libor plus 2.125% debentures issued February 15, 2017 are qualifying replacement securities within the definition of RCC. In connection with this redemption, the Company recognized a $6 loss on extinguishment of debt for unamortized deferred debt issuance costs.

~~Revolving Credit Facility~~

As previously reported, on March 29, 2018, the Company entered into an amendment to its Five-Year Credit Agreement dated October 31, 2014. The Amendment reset the level of the Company's minimum consolidated net worth financial covenant to $9 billion excluding AOCI from its former $13.5 billion (where net worth was defined as stockholders' equity excluding AOCI and including junior subordinated debt), among other updates. Among other changes, under an amended and restated credit agreement that became effective in June 2018 after the closing of the sale of the Company's life and annuity run-off business, the aggregate amount of principal of the credit facility decreased from $1 billion to $750, including a reduction to the amount available for30, 2019, uncollateralized letters of credit ~~from $250 to $100, the maturity date was extended to March 29, 2023,~~with an aggregate face amount of $165 and ~~the liens covenant and certain other covenants were modified.~~

Revolving loans from the Credit Facility may be in multiple currencies. U.S. dollar loans will bear interest at a floating rate equivalent to an indexed rate depending on the type of borrowing and a basis point spread based on The Hartford's credit rating and will mature no later than March 29, 2023. Letters of credit issued from the Credit Facility bear a fee based on The Hartford's credit rating and expire no later than March 29, 2024. The Credit Facility requires the Company to maintain a minimum consolidated net worth excluding AOCI of $9 billion, limits the ratio of senior debt to capitalization, excluding AOCI, at 35% and meet other customary covenants. The Credit Facility is for general corporate purposes.

~~As of~~ ~~June 30, 2018, no borrowings~~£60 million were outstanding under the Club Facility, $8 was outstanding under the Bilateral Facility and ~~$3 in~~$1 of cash collateral was posted at Lloyd's. The Bilateral Facility has unused capacity of $17 for issuance of additional letters of ~~credit were issued under~~credit. Principally as a result of second quarter loss on reinsurance, reserve increases and other adjustments upon the ~~Credit Facility and the Company was~~acquisition, Navigators Group is not in compliance with ~~all~~certain financial ~~covenants.~~

~~Commercial Paper~~covenants regarding tangible net worth and Funds at Lloyd’s (“FAL”) as set forth in the Club Facility and Bilateral Facility. The Company is in discussions with the participating banks to amend the covenants, and has obtained a temporary waiver.

As of June 30, ~~2018,~~2019, letters of credit with an aggregate face amount of 24 Australian Dollars were outstanding under the Hartford's maximum borrowings available under its commercial paper program was $1 billion and there was no commercial paper outstanding. The Company is dependent upon market conditions to access short-term financing through the issuance of commercial paper to investors. On July 19, 2018 the Board of Directors revised the Company's commercial paper issuance authorization from $1 billion to $750 to align the program with the Company's $750 five year revolving credit facility which became effective on June 11, 2018.Australian Dollar Facility,

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

~~12. Income Taxes~~

Income Tax Rate Reconciliation
Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
Tax provision at U.S. federal statutory rate [1] $ 112
$ (99 ) $ 221
$ 41
Tax-exempt interest (17 ) (30 ) (34 ) (60 )
Executive compensation 3
—
7
—
Stock-based compensation —
(1 ) (2 ) (8 )
Other 5
1
2
(4 )
Provision for income taxes $ 103
$ (129 ) $ 194
$ (31 )

Income Tax Expense

~~[1]Due~~



Income Tax Rate Reconciliation
	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Tax provision at U.S. federal statutory rate	$	95		$	112		$	258		$	221
Tax-exempt interest	(14		)	(17		)	(29		)	(34		)
Executive compensation	1			3			5			7
Stock-based compensation	(1		)	—			(4		)	(2		)
Tax Reform	—			5			—			2
Other	3			—			(1		)	—
Provision for income taxes	$	84		$	103		$	229		$	194

In addition to the ~~passage~~effect of tax-exempt interest, the Company's effective tax rate for the three and six months ended June 30, 2019 reflects a federal income tax expense of $1 and $5, respectively, related to non-deductible executive compensation and a benefit of $1 and $4, respectively, related to a deduction for stock-based compensation that vested at a fair value per share greater than the fair value on the date of grant.

Uncertain Tax ~~Reform on December 22, 2017, current and prior period federal statutory rates are reflected at 21% and 35% respectively.~~Positions

																	Rollforward of Unrecognized Tax Benefits
	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017		2019		2018		2019		2018
Balance, beginning of period	$	9	$	12	$	9	$	12	$	14	$	9	$	14	$	9
Gross increases - tax positions in prior period	—		—		—		—		—		—		—		—
Gross decreases - tax positions in prior period	—		—		—		—		—		—		—		—
Balance, end of period	$	9	$	12	$	9	$	12	$	14	$	9	$	14	$	9

The entire amount of unrecognized tax benefits, if recognized, would affect the effective tax rate in the period of the release.

The federal audits have been completed through 2013, and the Company is not currently under examination for any open years. Management believes that adequate provision has been made in the consolidated financial statements for any potential adjustments that may result from tax examinations and other tax-related matters for all open tax years.Other Tax Matters

The Company classifies interest and penalties (if applicable) as income tax expense in the consolidated financial statements. The Company recognized no interest expense for the three and six months ended June 30, 2018 and 2017, respectively. The Company had no interest payable as of June 30, 2018 and 2017. The Company does not believe it would be subject to any penalties in any open tax years and, therefore, has not recorded any accrual for penalties.

Net deferred income taxes include the future tax benefits associated with the net operating loss carryover, foreign tax credit carryover and general business credit carryforward as shown in the table below.

~~Net Operating Loss Carryover~~

U.S. NOL's reflected above arose in taxable years prior to 2017 and are still subject to prior tax law which allows for carryback and limits the period over which carryforwards may be used to offset taxable income as shown in the above table. Utilization of the Company's loss carryovers is dependent upon the generation of sufficient future taxable income. Given the expected earnings of the Company going forward, including earnings of its property and casualty, group benefits and mutual fund businesses, the Company expects to generate sufficient taxable income in the future to utilize its net operating loss carryover. Although the Company projects there will be sufficient future taxable income to fully recover the remainder of the loss carryover, the

~~Company's estimate of the likely realization may change over time.~~

~~Tax Credit Carryovers~~

~~Foreign Tax Credits and General Business Credits-~~ These credits are available to offset regular federal income taxes from future taxable income. The use of these credits prior to expiration depends on the generation of sufficient taxable income to first utilize all U.S. net operating loss carryovers. However, the Company has purchased certain investments which allow for utilization of the foreign tax credits without first using the net operating loss carryover. Consequently, the Company believes it

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~12. Income Taxes~~ ~~(continued)~~

~~is more likely than not the foreign tax credit carryover will be fully realized. Accordingly, no valuation allowance has been provided.~~

~~Alternative Minimum Tax Credit Carryovers-~~ As of June 30, ~~2018,~~2019 the Company had alternative minimum tax (AMT) credit ~~(AMT)~~ carryovers ~~net~~ of ~~a sequestration fee payable, of $793,~~$835 which are reflected as a current income tax ~~receivables~~receivable within ~~Other Assets~~other assets in the accompanying ~~condensed consolidated balance sheet.~~Condensed Consolidated Balance Sheets. AMT credits may be used to offset a regular tax liability for any taxable year beginning after December 31, 2017, and are refundable at an amount equal to 50 percent of the excess of the minimum tax credit for the taxable year over the amount of ~~the~~ credit allowable for the year against regular tax liability. Any remaining credits not used against regular tax liability are refundable in the 2021 tax year to be ~~collected~~realized in 2022. The sequestration fee applies to refunds of AMT credits but does not apply if those credits are used against regular tax liability. As of June 30, 2018, the Company's AMT credit carryover was net of an estimated sequestration fee payable of $53, but the amount of the fee that is ultimately payable is subject to change depending on the level and timing of future taxable income and any subsequent changes in the sequestration rate. For the three and six months ended June 30, ~~2018,~~2019, the Company ~~recorded income~~offset $4 and $6 of regular tax liability with AMT credits.

The Company had net operating loss (NOL) carryforwards in the United States and the United Kingdom for which future tax benefits of $0$352 and ~~$3 related to~~$2 have been recognized and are included in the ~~reduction~~Condensed Consolidated Balance Sheet as a component of the ~~sequestration rate~~net deferred tax asset. The Company also has NOLs in other foreign jurisdictions for which a full valuation allowance has been established. Although the Company projects there will be sufficient future taxable income to fully recover the remainder of the NOL carryover for which benefits have been recognized, the Company's estimate of the likely realization may change over time. The U.S. NOL carryovers, if unused, would expire between 2026 and 2036. The foreign NOLs do not expire.

The federal audits for the Company have been completed through 2013, and the Company is not currently under federal examination for any open years. Navigators Group is currently under federal audit for the 2016 year and has completed examinations through 2015. Management believes that adequate provision has been made in the Company's Condensed Consolidated Financial Statements for any potential adjustments that may result from ~~6.6 percent~~tax examinations and other tax-related matters for all open tax years.

The Company classifies interest and penalties (if applicable) as income tax expense in the condensed consolidated financial statements. The Company recognized no interest expense for the three and six months ended June 30, 2019 and 2018. The Company had no interest payable as of June 30, 2019 and 2018. The Company does not believe it would be subject to ~~6.2 percent.~~any penalties in any open tax years and, therefore, has not recorded any accrual for penalties.

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~13. Commitments and Contingencies~~

12. COMMITMENTS AND CONTINGENCIES

Management evaluates each contingent matter separately. A loss is recorded if probable and reasonably estimable. Management establishes liabilities for these contingencies at its “best estimate,” or, if no one number within the range of possible losses is more probable than any other, the Company records an estimated liability at the low end of the range of losses.

Litigation

The Hartford is involved in claims litigation arising in the ordinary course of business, both as a liability insurer defending or providing indemnity for third-party claims brought against insureds and as an insurer defending coverage claims brought against it. The Hartford accounts for such activity through the

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

establishment of unpaid loss and loss adjustment expense reserves. Subject to the uncertainties in the following discussion under the caption ~~“Asbestos~~“Run-off Asbestos and Environmental Claims,” management expects that the ultimate liability, if any, with respect to such ordinary-course claims litigation, after consideration of provisions made for potential losses and costs of defense, will not be material to the consolidated financial condition, results of operations or cash flows of The Hartford.

The Hartford is also involved in other kinds of legal actions, some of which assert claims for substantial amounts. These actions include, among others, and in addition to the matters in the following discussion, putative state and federal class actions seeking certification of a state or national class. Such putative class actions have alleged, for example, underpayment of claims or improper underwriting practices in connection with various kinds of insurance policies, such as personal and commercial automobile, property, disability, life and inland marine. The Hartford also is involved in individual actions in which punitive damages are sought, such as claims alleging bad faith in the handling of insurance claims or other allegedly unfair or improper business practices. Like many other insurers, The Hartford also has been joined in actions by asbestos plaintiffs asserting, among other things, that insurers had a duty to protect the public from the dangers of asbestos and that insurers committed unfair trade practices by asserting defenses on behalf of their policyholders in the underlying asbestos cases. Management expects that the ultimate liability, if any, with respect to such lawsuits, after consideration of provisions made for estimated losses, will not be material to the consolidated financial condition of The Hartford. Nonetheless, given the large or indeterminate amounts sought in certain of these actions, and the inherent unpredictability of litigation, the outcome in certain matters could, from time to time, have a material adverse effect on the ~~Company’s~~Company's results of operations or cash flows in particular quarterly or annual periods.

In addition to the inherent difficulty of predicting litigation outcomes, the Mutual Funds Litigation identified below purports to seek substantial damages for unsubstantiated conduct spanning a multi-year period based on novel applications of complex legal theories. The alleged damages are not quantified or factually supported in the complaint, and, in any event, the Company’s experience shows that demands for damages often bear little relation to a reasonable estimate of potential loss. The application of the legal standard identified by the court for assessing the potentially available damages, as described below, is inherently unpredictable, and no legal precedent has been identified that would aid in determining a reasonable estimate of

~~potential loss. Accordingly, management cannot reasonably estimate the possible loss or range of loss, if any.~~

~~Mutual Funds Litigation~~ — In February 2011, a derivative action was brought on behalf of six Hartford retail mutual funds in the United States District Court for the District of New Jersey, alleging that Hartford Investment Financial Services, LLC (“HIFSCO”), an indirect subsidiary of the Company, received excessive advisory and distribution fees in violation of its statutory fiduciary duty under Section 36(b) of the Investment Company Act of 1940. During the course of the litigation, the claims regarding distribution fees were dismissed without prejudice, the lineup of funds as plaintiffs changed several times, and the plaintiffs added as a defendant Hartford Funds Management Company (“HFMC”), an indirect subsidiary of the Company that assumed the role of advisor to the funds as of January 2013. In June 2015, HFMC and HIFSCO moved for summary judgment, and plaintiffs cross-moved for partial summary judgment with respect to one fund. In March 2016, the court denied the plaintiff's motion, and granted summary judgment for HIFSCO and HFMC with respect to one fund, leaving six funds as plaintiffs: The Hartford Balanced Fund, The Hartford Capital Appreciation Fund, The Hartford Floating Rate Fund, The Hartford Growth Opportunities Fund, The Hartford Healthcare Fund, and The Hartford Inflation Plus Fund. The court further ruled that the appropriate measure of damages on the surviving claims would be the difference, if any, between the actual advisory fees paid through trial and the fees permitted under the applicable legal standard. A bench trial on the issue of liability was held in November 2016. In February 2017, the court granted judgment for HIFSCO and HFMC as to all claims. Plaintiffs have appealed to the United States Court of Appeals for the Third Circuit.

Run-off Asbestos and Environmental Claims–The Company continues to receive asbestos and environmental ("A&E") claims. Asbestos claims relate primarily to bodily injuries asserted by people who came in contact with asbestos or products containing asbestos. Environmental claims relate primarily to pollution and related clean-up costs.

The vast majority of the Company's exposure to A&E relates to policy coverages provided prior to 1986. These exposures, together with certain exposures to latent environmental claims under general liability policies sold after 1986, are reported in Property & Casualty Other Operations ("Run-off A&E"). In addition, as part of its on-going operations, the Company writes environmental and pollution liability coverages.

Prior to 1986, the Company wrote several different categories of insurance contracts that may cover A&E claims. First, the Company wrote primary policies providing the first layer of coverage in an insured’s liability program. Second, the Company wrote excess and umbrella policies providing higher layers of coverage for losses that exhaust the limits of underlying coverage. Third, the Company acted as a reinsurer assuming a portion of those risks assumed by other insurers writing primary, excess, umbrella and reinsurance coverages.

Significant uncertainty limits the ability of insurers and reinsurers to estimate the ultimate reserves necessary for unpaid gross losses and expenses related to environmental and particularly asbestos claims. The degree of variability of gross reserve

estimates for these exposures is significantly greater than for other more traditional exposures.

In the case of the reserves for asbestos exposures, factors contributing to the high degree of uncertainty include inadequate loss development patterns, plaintiffs’ expanding theories of liability, the risks inherent in major litigation, and inconsistent

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~13. Commitments and Contingencies~~ ~~(continued)~~

emerging legal doctrines. Furthermore, over time, insurers, including the Company, have experienced significant changes in the rate at which asbestos claims are brought, the claims experience of particular insureds, and the value of claims, making predictions of future exposure from past experience uncertain. Plaintiffs and insureds also have sought to use bankruptcy proceedings, including “pre-packaged” bankruptcies, to accelerate and increase loss payments by insurers. In addition, some policyholders have asserted new classes of claims for coverages to which an aggregate limit of liability may not apply. Further uncertainties include insolvencies of other carriers and unanticipated developments pertaining to the Company’s ability to recover reinsurance for A&E claims. Management believes these issues are not likely to be resolved in the near future.

In the case of the reserves for environmental exposures, factors contributing to the high degree of uncertainty include expanding theories of liability and damages, the risks inherent in major litigation, inconsistent decisions concerning the existence and scope of coverage for environmental claims, and uncertainty as to the monetary amount being sought by the claimant from the insured.

The reporting pattern for assumed reinsurance claims, including those related to A&E claims, is much longer than for direct claims. In many instances, it takes months or years to determine that the policyholder’s own obligations have been met and how the reinsurance in question may apply to such claims. The delay in reporting reinsurance claims and exposures adds to the uncertainty of estimating the related reserves.

It is also not possible to predict changes in the legal and legislative environment and their effect on the future development of A&E claims.

Given the factors described above, the Company believes the actuarial tools and other techniques it employs to estimate the ultimate cost of claims for more traditional kinds of insurance exposure are less precise in estimating reserves for A&E exposures. For this reason, the Company principally relies on exposure-based analysis to estimate the ultimate costs of these claims, both gross and net of reinsurance, and regularly evaluates new account information in assessing its potential A&E exposures. The Company supplements this exposure-based analysis with evaluations of the Company’s historical direct net loss and expense paid and reported experience, and net loss and expense paid and reported experience by calendar and/or report year, to assess any emerging trends, fluctuations or characteristics suggested by the aggregate paid and reported activity.

While the Company believes that its current A&E reserves are appropriate, significant uncertainties limit the ability of insurers and reinsurers to estimate the ultimate reserves necessary for unpaid losses and related expenses. The ultimate liabilities, thus, could exceed the currently recorded reserves, and any such additional liability, while not estimable now, could be material to The Hartford’s consolidated operating results and liquidity.

AsTHE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

For its Run-off A&E, as of June 30, ~~2018,~~2019, the Company reported ~~$1.1 billion~~$935 of net asbestos reserves and ~~$223~~$139 of net environmental ~~reserves.~~ reserves. While the Company believes that its current Run-off A&E reserves are appropriate, significant uncertainties limit our ability to estimate

the ultimate reserves necessary for unpaid losses and related expenses. The ultimate liabilities, thus, could exceed the currently recorded reserves, and any such additional liability, while not reasonably estimable now, could be material to The Hartford's consolidated operating results and liquidity.

Effective December 31, 2016, the Company entered into an A&E adverse development cover ("ADC") reinsurance agreement with ~~National Indemnity Company ("NICO"), a subsidiary of Berkshire Hathaway Inc.,~~NICO to reduce uncertainty about potential adverse development of A&E reserves. Under the ADC, the Company paid a reinsurance premium of $650 for NICO to assume adverse net loss and allocated loss adjustment expense reserve development up to $1.5 billion above the Company’s existing net A&E reserves as of December 31, 2016 of approximately $1.7 billion. The $650 reinsurance premium was placed in a collateral trust account as security for NICO’s claim payment obligations to the Company. Under retroactive reinsurance accounting, net adverse A&E reserve development after December 31, 2016 will result in an offsetting reinsurance recoverable up to the $1.5 billion limit. Cumulative ceded losses up to the $650 reinsurance premium paid are recognized as a dollar-for-dollar offset to direct losses incurred. Cumulative ceded losses exceeding the $650 reinsurance premium paid would result in a deferred gain. The deferred gain would be recognized over the claim settlement period in the proportion of the amount of cumulative ceded losses collected from the reinsurer to the estimated ultimate reinsurance recoveries. Consequently, until periods when the deferred gain is recognized as a benefit to earnings, cumulative adverse development of A&E claims after December 31, 2016 in excess of $650 may result in significant charges against earnings. Furthermore, cumulative adverse development of A&E claims could ultimately exceed the $1.5 billion treaty limit in which case any adverse development in excess of the treaty limit would be absorbed as a charge to earnings by the Company. In these scenarios, the effect of these ~~changes~~charges could be material to the Company’s consolidated operating results and liquidity. As of June 30, ~~2018,~~2019, the Company has incurred $~~285~~523 in cumulative

adverse development on A&E reserves that have been ceded under the ADC treaty with NICO, leaving approximately ~~$1.2 billion~~$977 of coverage available for future adverse net reserve development, if any.

Derivative Commitments

Certain of the Company’s derivative agreements contain provisions that are tied to the financial strength ratings, as set by nationally recognized statistical agencies, of the individual legal entity that entered into the derivative agreement. If the legal entity’s financial strength were to fall below certain ratings, the counterparties to the derivative agreements could demand immediate and ongoing full collateralization and in certain instances enable the counterparties to terminate the agreements and demand immediate settlement of all outstanding derivative positions traded under each impacted bilateral agreement. The settlement amount is determined by netting the derivative positions transacted under each agreement. If the termination rights were to be exercised by the counterparties, it could impact the legal entity’s ability to conduct hedging activities by increasing the associated costs and decreasing the willingness of counterparties to transact with the legal entity. The aggregate fair value of all derivative instruments with credit-risk-related

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~13. Commitments and Contingencies~~ ~~(continued)~~

contingent features that are in a net liability position as of June 30, ~~2018~~2019 was $7776. OfFor this $7776, the legal entities have posted collateral of $7372 in the normal course of business. Based on derivative market values as of June 30, ~~2018~~2019, a downgrade of one level below the current financial strength ~~rates~~ratings by either Moody's or S&P would not require additional assets to be posted as collateral. Based on derivative market values as of June 30, ~~2018~~2019, a downgrade of two levels below the current financial strength ratings by either Moody's or S&P would require an additional $7 of assets to be posted as collateral. These collateral amounts could change as derivative market values change, as a result of changes in our hedging activities or to the extent changes in contractual terms are negotiated. The nature of the collateral that we post, if required, is primarily in the form of U.S. Treasury bills, U.S. Treasury notes and government agency securities.

~~Table~~

Capital Purchase Program ("CPP") Warrants

CPP warrants were issued in 2009 as part of ~~Contents~~a program established by the U.S. Department of the Treasury under the Emergency Economic Stabilization Act of 2008. The CPP warrants expired on June 26, 2019.

CPP warrant exercises were 1.0 million and 0.1 million for the three months ended June 30, 2019 and 2018, respectively. CPP warrant exercises were 1.9 million and 0.1 million for the six months ended June 30, 2019 and 2018, respectively. As of December 31, 2018, the Company had 1.9 million of CPP warrants outstanding and exercisable.

Equity Repurchase Program

In February, 2019, the Company announced a $1.0 billion share repurchase authorization by the Board of Directors which is effective through December 31, 2020. Based on projected holding company resources, the Company has begun share repurchases in 2019 but anticipates using the majority of the program in 2020. Any repurchase of shares under the equity repurchase program is dependent on market conditions and other factors.

During the period July 1, 2019 to July 31, 2019, the Company repurchased approximately 0.3 million common shares for $16.

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

~~Capital Purchase Program ("CPP") Warrants~~



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

~~As of~~ ~~June 30, 2018~~ and December 31, 2017, respectively, the Company has 2.1 million and 2.2 million of CPP warrants outstanding and exercisable. CPP warrant exercises were 0.1 million for the three months ended June 30, 2018 and 2017, respectively. CPP warrant exercises were 0.1 million and 1.1 million for the six months ended June 30, 2018 and 2017, respectively.

~~The declaration of common stock dividends by the Company in excess of a threshold triggers a provision in the Company's~~

~~warrant agreement with The Bank of New York Mellon resulting in adjustments to the CPP warrant exercise price. Accordingly, the declaration of a common stock dividend during the three months ended~~ ~~June 30, 2018~~ ~~resulted in an adjustment to the CPP warrant exercise price. The CPP warrant exercise price was $8.930 as of~~ ~~June 30, 2018~~ ~~and $8.999 as of December 31, 2017.~~

~~Equity Repurchase Program~~

~~The Company does not currently have an equity repurchase authorization in 2018.~~

14. CHANGES IN AND RECLASSIFICATIONS FROM ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

~~15. Changes In and Reclassifications From Accumulated Other Comprehensive Income (Loss)~~

[1]The reduction in AOCI included the effect of removing $758 of Talcott Resolution AOCI from the balance sheet when the business was sold effective May 31, 2018.

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Changes in AOCI, Net of Tax for the Six Months Ended June 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] (2,030 ) 1
(13 ) (5 ) (1 ) (2,048 )
Amounts reclassified from AOCI 37
(1 ) (19 ) —
20
37
OCI, net of tax (1,993 ) —
(32 ) (5 ) 19
(2,011 )
Ending balance $ 211
$ (3 ) $ (12 ) $ 33
$ (1,582 ) $ (1,353 )

[1]Includes reclassification to retained earnings of $88 of stranded tax effects and $93 of net unrealized ~~gains. Refer~~gains, net of tax, related to equity securities. For further discussion of these reclassifications, see Note 1 - Basis of Presentation and Significant Accounting Policies ~~for further information.~~of Notes to the Consolidated Financial Statements included in The Hartford's 2018 Form 10-K Annual Report.

~~Table of Contents~~

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

15. ~~Changes In and Reclassifications From Accumulated Other Comprehensive Income (Loss)~~ ~~(continued)~~

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~15. Changes In and Reclassifications From Accumulated Other Comprehensive Income (Loss)~~ ~~(continued)~~

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~15. Changes In and Reclassifications From Accumulated Other Comprehensive Income (Loss)~~ ~~(continued)~~

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~16. Employee Benefit Plans~~

EMPLOYEE BENEFIT PLANS

The Company’s employee benefit plans are described in Note 18 - Employee Benefit Plans of Notes to Consolidated Financial

Statements included in The Hartford’s ~~2017~~2018 Annual Report on Form 10-K.

Net Periodic Cost (Benefit)
Pension Benefits
Other
Postretirement
Benefits
Three Months Ended June 30, Three Months Ended June 30,
2018 2017 2018 2017
Service cost $ 1
$ 1
$ —
$ —
Interest cost 36
49
1
2
Expected return on plan assets (59 ) (80 ) (1 ) (2 )
Amortization of prior service credit —
—
(2 ) (2 )
Amortization of actuarial loss 13
15
2
1
Settlements —
750
—
—
Net periodic cost (benefit) $ (9 ) $ 735
$ —
$ (1 )

~~Table~~

The Hartford has operating leases for real estate and equipment. The right-of-use asset as of ~~Contents~~June 30, 2019 was $216 and is included in property and equipment, net, in the Condensed Consolidated Balance Sheet. The lease liability as of June 30, 2019 was $226 and is included in other liabilities in the Condensed Consolidated Balance Sheet. Variable lease costs include changes in interest rates on variable rate leases primarily for automobiles.

Components of Lease Expense



	Three Months Ended June 30,			Six Months Ended June 30,
	2019			2019
Operating lease cost	$	12		$	23
Short-term lease cost	—			1
Variable lease cost	—			—
Sublease income	(1		)	(2		)
Total lease costs included in insurance operating costs and other expenses	$	11		$	22

Supplemental Operating Lease Information



	June 30, 2019
Operating cash flows for operating leases (for the six months ended)	$	22
Weighted-average remaining lease term in years for operating leases	6 years
Weighted-average discount rate for operating leases	3.6		%

Future Minimum Lease Payments



	As of June 30, 2019
2019	$	27
2020	51
2021	40
2022	34
2023	31
Thereafter	68
Total future minimum lease payments	251
Less: Discount on lease payments to present value	25
Total lease liability	$	226

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

BUSINESS DISPOSITION AND DISCONTINUED OPERATIONS

In the second quarter of 2018, The Hartford modified the terms of the portion of its outstanding 2016 and 2017 performance share awards that are based on actual versus targeted return on equity over the performance period. The modification eliminated the benefit to return on equity that arose from the charge against earnings in 2017 driven by the effect of the lower corporate income tax rate on the carrying value of net deferred tax assets. This modification had no impact on compensation cost recognized over the vesting period since compensation cost based on the original performance share conditions is projected to be higher than what the cost would be based on the performance share conditions as modified.

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~18. Business Dispositions and Discontinued Operations~~

~~Discontinued Operations~~

Sale of life and annuity ~~run-off~~ business

On May 31, 2018, the Company’s wholly-owned subsidiary, Hartford Holdings, Inc. ~~(HHI)~~, completed the sale of its life and annuity ~~run-off~~ business to a group of investors led by Cornell Capital LLC, Atlas Merchant Capital LLC, TRB Advisors LP, Global Atlantic Financial Group, Pine Brook and J. Safra Group. Under the terms of the sale agreement signed December 3, 2017, the investor group formed a limited partnership, Hopmeadow Holdings LP, that acquired ~~Hartford Life, Inc. (HLI),~~HLI, and its life and annuity operating ~~subsidiaries, for cash of approximately $1.4 billion after a pre-closing dividend to The Hartford of $300.~~subsidiaries. The Hartford received a 9.7% ownership interest in the limited partnership valued at a cost of $164. In addition, as part of the terms of the sale agreement, The Hartford reduced its long-term debt by $142 because the debt, which was issued by HLI, was included as part of the sale. Including cash proceeds and the retained equity interest and net of transaction costs, net proceeds for the sale were approximately $1.5 billion.partnership. The life and annuity ~~run-off~~ operations met the criteria for reporting as discontinued operations and are reported in the Corporate category through the date of sale.

The Company has recognized a loss on sale within discontinued operations of approximately $3.0 billion including $3.3 billion in the fourth quarter of 2017 and a reduction in loss on sale of $213 in the first six months of 2018. The reduction in loss on sale in 2018 primarily resulted from the reclassification to retained earnings of $193 of tax effects stranded in AOCI due to the accounting for Tax Reform and a $133 increase in estimated retained tax benefits, primarily net operating loss carryovers, partially offset by $104 of operating income from discontinued operations during the period up until the closing date and a reclassification of $10 of net unrealized capital gains from AOCI to retained earnings. See Note 1 - Adoption of New Accounting Standards within Basis of Presentation and Significant Accounting Policies, for additional information about the reclassifications from AOCI to retained earnings. The estimated amount of retained net operating loss carryovers depends on the estimated tax basis of the business sold which has increased since the date the Company entered into the sale agreement. At closing, shareholders’ equity was further reduced for the amount of AOCI of the life and annuity run-off business, which was approximately $758 largely consisting of net unrealized gains on investments, net of shadow DAC. The AOCI balance was $1 billion as of December 31, 2017.

Cash inflows and outflows from and to the life and annuity run-off business after closing were immaterial to the overall inflows and outflows the Company. Additionally, the revenues and expenses presented in continuing operations related to pre-disposal operations were immaterial.

~~The Company will manage invested assets of the life and annuity run-off business for an initial term of five years and provide transition services for an estimated period of 12 to 24 months.~~

~~The~~ Hartford reported its 9.7% ownership interest in Hopmeadow Holdings LP, which is accounted for under the equity method, in other assets in the Condensed Consolidated Balance ~~Sheet, to be accounted for under the equity method.~~Sheet. The

Hartford ~~will recognize~~recognizes its share of income in other revenues in the Condensed Consolidated Statement of ~~Operations. Information about before tax income of Hopmeadow Holdings LP after the disposition and recognition of the Company's share of that income will be reported~~Operations on a ~~delayed-basis~~three month delay, when financial information from the investee becomes ~~available, as private equity partnerships are generally reported on a three-month delay. Before~~available. The Company recognized $3 and $31, before tax, ~~income (loss)~~ of ~~Talcott Resolution for the period the business was wholly-owned by the Company was $(9) and $113~~income for the three and six months ended June 30, ~~2018 and $143 and $227 for~~2019, respectively.

For further information on the ~~three and six months ended June 30, 2017.~~

~~Major Classes of Assets and Liabilities Transferred to the Buyer in Connection~~sale, including ongoing transactions with the ~~Sale~~

Carrying Value
as of Closing
Carrying Value
as of 12/31/2017
Assets
Cash and investments $ 27,058
$ 30,135
Reinsurance recoverables 20,718
20,785
Loss accrual [1] (3,044 ) (3,257 )
Other assets 2,907
1,439
Separate account assets 110,773
115,834
Total assets held for sale 158,412
164,936
Liabilities
Reserve for future policy benefits and unpaid loss and loss adjustment expenses $ 14,308
$ 14,482
Other policyholder funds and benefits payable 28,680
29,228
Long-term debt 142
142
Other liabilities 2,222
2,756
Separate account liabilities 110,773
115,834
Total liabilities held for sale $ 156,125
$ 162,442


~~[1]~~	~~Represents the estimated accrued loss on sale of the Company's life and annuity run-off business.~~

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~18.~~life and annuity business sold, see Note 20 - Business Dispositions and Discontinued Operations ~~(continued)~~of Notes to Consolidated Financial Statements, included in The Hartford's 2018 Form 10-K Annual Report.

Reconciliation of the Major Line Items Constituting Pretax Profit (Loss) of Discontinued Operations


	Three Months Ended June 30,					Six Months Ended June 30,						Three Months Ended June 30,			Six Months Ended June 30,
	2018			2017		2018			2017			2018
Revenues
Earned premiums	$	12		$	35	$	39		$	70		$	12		$	39
Fee income and other	150			226		382			448			150			382
Net investment income	207			320		519			639			207			519
Net realized capital losses	(93		)	21		(72		)	(25		)	(93		)	(72		)
Total revenues	276			602		868			1,132			276			868
Benefits, losses and expenses
Benefits, losses and loss adjustment expenses	207			346		535			679			207			535
Amortization of DAC	17			24		58			43			17			58
Insurance operating costs and other expenses [1]	61			89		162			183			61			162
Total benefits, losses and expenses	285			459		755			905			285			755
Income before income taxes	(9		)	143		113			227
Income tax expense	(6		)	30		9			41
Income from operations of discontinued operations, net of tax	(3		)	113		104			186
Income (loss) before income taxes												(9		)	113
Income tax expense (benefit)												(6		)	9
Income (loss) from operations of discontinued operations, net of tax												(3		)	104
Net realized capital gain on disposal, net of tax	151			—		213			—			151			213
Income from discontinued operations, net of tax	$	148		$	113	$	317		$	186		$	148		$	317

[1]Corporate allocated overhead has been included in continuing operations.

Cash Flows from Discontinued Operations



	Six Months Ended June 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 six months ended June 30, 2018.

Cash flows from discontinued operations are included in the Condensed Consolidated Statement of Cash ~~Flows were as follows:~~

~~Cash Flows from Discontinued Operations~~

Six Months Ended June 30,
2018 2017
Net cash provided by operating activities from discontinued operations $ 603
$ 525
Net cash provided by (used in) investing activities from discontinued operations $ 463
$ (316 )
Net cash used in financing activities from discontinued operations [1] $ (737 ) $ (203 )
Cash paid for interest $ —
$ 2

~~[1] Excludes return of capital to parent of $619 and $299 for the six months ended June 30, 2018 and 2017, respectively.~~

Flows.

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

(Dollar amounts in millions except for per share data, unless otherwise stated)

The Hartford provides projections and other forward-looking information in the following discussions, which contain many forward-looking statements, particularly relating to the Company’s future financial performance. These forward-looking statements are estimates based on information currently available to the Company, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to the cautionary statements set forth on pages 34 and 45 of this Form 10-Q. Actual results are likely to differ, and in the past have differed, materially from those forecast by the Company, depending on the outcome of various factors, including, but not limited to, those set forth in the following ~~discussion and in~~discussion; Part II, Item 1A, Risk Factors of this Quarterly Report on Form 10-Q; Part I, Item 1A, Risk Factors in The Hartford’s ~~2017~~2018 Form 10-K Annual ~~Report,~~Report; and ~~those identified from time to time in~~ our other filings with the Securities and Exchange Commission. The Hartford undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise.

On May 23, 2019, the Company completed the previously announced acquisition of The Navigators Group, Inc. ("Navigators Group"), a global specialty underwriter, for $70 a share, or $2.136 billion in cash, including transaction expenses. Immediately after closing on the acquisition of Navigators Group, effective May 23, 2019, the Company purchased an aggregate excess of loss reinsurance agreement covering adverse development (“Navigators ADC”) from National Indemnity Company ("NICO") on behalf of Navigators Insurance Company and certain of its affiliates (collectively, the “Navigators Insurers”). For further information regarding the Navigators ADC, refer to Insurance Risk in the Enterprise Risk Management section.

On May 31, 2018, Hartford Holdings, Inc., a wholly owned subsidiary of the Company, completed the sale of the issued and outstanding equity of Hartford Life, Inc. (“HLI”), a holding company, and its life and annuity operating subsidiaries. For discussion of this transaction, see Note 1817 - Business ~~Dispositions~~Disposition and Discontinued Operations of Notes to Condensed Consolidated Financial Statements.

On February 16, 2018, The Hartford entered into a renewal rights agreement with the Farmers Exchanges, of the Farmers Insurance Group of Companies, to acquire its Foremost-branded small commercial business sold through independent agents. ~~Renewal~~Written premium from this agreement ~~is expected beginning~~began in the third quarter of 2018.

~~On November 1, 2017,~~ ~~Hartford Life and Accident Insurance Company ("HLA"), a wholly owned subsidiary of the Company,~~ completed the acquisition of Aetna's U.S. group life and disability business through a reinsurance transaction. Aetna's U.S. group life and disability revenue and earnings since the acquisition date are included in the operating results of the Company's Group Benefits reporting segment. For discussion of this transaction, see Note 2 - Business Acquisitions of Notes to Condensed Consolidated Financial Statements.

On May 10, 2017, the Company completed the sale of its U.K. property and casualty run-off subsidiaries. The operating results of the Company's U.K. property and casualty run-off subsidiaries are included in the P&C Other Operations reporting segment. For discussion of this transaction, see Note 20 - Business Dispositions and Discontinued Operations in The Hartford's 2017 Form 10K Annual Report Notes to Consolidated Financial Statements.

Certain reclassifications have been made to historical financial information presented in Management's Discussion and Analysis

of Financial Condition and Results of Operations ("MD&A") to conform to the current period presentation.

Distribution costs within the ~~Mutual~~Hartford Funds segment that were previously netted against fee income are presented gross in insurance operating costs and other expenses.

The Hartford defines increases or decreases greater than or equal to 200% as “NM” or not meaningful.

INDEX



Description	Page
Key Performance Measures and Ratios	52
The Hartford's Operations	56
Consolidated Results of Operations	59
Investment Results	62
Critical Accounting Estimates	64
~~The Hartford's Operations~~Commercial	67
~~Consolidated Results of Operations~~ Lines	71
~~Investment Results~~	74
~~Critical Accounting Estimates~~ Personal Lines	75
~~Commercial~~Property & Casualty Other Operations ~~Lines~~	79
Group Benefits	80
Hartford Funds	82
Corporate	84
~~Personal Lines~~ Enterprise Risk Management	8885
~~Property & Casualty Other Operations~~Capital Resources and Liquidity	9295
~~Group Benefits~~	93
~~Mutual Funds~~	96
~~Corporate~~	98
~~Enterprise Risk Management~~	99
~~Capital Resources and Liquidity~~	~~109~~
Impact of New Accounting Standards	~~115~~101

KEY PERFORMANCE MEASURES AND RATIOS

The Company considers the measures and ratios in the following discussion to be key performance indicators for its businesses. Management believes that these ratios and measures are useful in understanding the underlying trends in The Hartford’s businesses. However, these key performance indicators should only be used in conjunction with, and not in lieu of, the results presented in the segment discussions that follow in this MD&A. These ratios and measures may not be comparable to other performance measures used by the Company’s competitors.

Definitions of Non-GAAP and Other Measures and Ratios

Assets Under Management ("AUM")- include mutual fund and ~~Exchange-Traded Products~~exchange-traded products ("ETP") assets. AUM is a measure used by the ~~Company~~Company's Hartford Funds segment because a significant portion of the Company’s mutual fund and ETP revenues are based upon asset values. These revenues

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

~~values. These revenues~~ increase or decrease with a rise or fall in AUM whether caused by changes in the market or through net flows.

Book Value per Diluted Share excluding accumulated other comprehensive income ("AOCI")-is calculated based upon a non-GAAP financial measure. It is calculated by dividing (a) ~~total~~common stockholders' equity, excluding AOCI, ~~after~~net of tax, by (b) common shares outstanding and dilutive potential common shares. Book value per diluted share is the most directly comparable U.S. GAAP ("GAAP") measure. The Company provides this measure to enable investors to analyze the amount of the Company's net worth that is primarily attributable to the Company's business operations. The Company believes it is useful to investors because it eliminates the effect of items in AOCI that can fluctuate significantly from period to period, primarily based on changes in interest rates.

~~Current Accident Year Catastrophe Ratio-~~a component of the loss and loss adjustment expense ratio, represents the ratio of catastrophe losses incurred in the current accident year (net of reinsurance) to earned premiums. A catastrophe is an event that causes $25 or more in industry insured property losses and affects a significant number of property and casualty policyholders and insurers, as defined by the Property Claim Service office of Verisk. The current accident year catastrophe ratio includes the effect of catastrophe losses, but does not include the effect of reinstatement premiums.

Combined Ratio-the sum of the loss and loss adjustment expense ratio, the expense ratio and the policyholder dividend ratio. This ratio is a relative measurement that describes the related cost of losses and expenses for every $100 of earned premiums. A combined ratio below 100 demonstrates underwriting profit; a combined ratio above 100 demonstrates underwriting losses.

Core Earnings- a non-GAAP measure, is an important measure of the Company’s operating performance. The Company believes that core earnings provides investors with a valuable measure of the underlying performance of the Company’s businesses because it reveals trends in our insurance and financial services businesses that may be obscured by including the net effect of certain realized capital gains and losses, ~~certain restructuring and other costs,~~ integration and transaction costs in connection with an acquired business, ~~pension settlements,~~ loss on extinguishment of debt, gains and losses on

reinsurance transactions, change in loss reserves upon acquisition of a business, income tax benefit from a reduction in deferred income tax valuation allowance, ~~impact of the Tax Cuts and Jobs Act of 2017 ("Tax Reform") on net deferred tax assets,~~ and results of discontinued operations. Some realized capital gains and losses are primarily driven by investment decisions and external economic developments, the nature and timing of which are unrelated to the insurance and underwriting aspects of our business. Accordingly, core earnings excludes the effect of all realized gains and losses that tend to be variable from period to period based on capital market conditions. The Company believes, however, that some realized capital gains and losses are integrally related to our insurance operations, so core earnings includes net realized gains and losses such as net periodic settlements on credit derivatives. These net realized gains and losses are directly related to an offsetting item included in the income statement such as net investment income. Core earnings are net of preferred stock dividends declared since they are a cost of financing more akin to interest expense on debt and are expected to be a recurring expense as long as the preferred stock is outstanding. Net income (loss) is, net income (loss) available to common stockholders and income (loss) from continuing operations, net of tax, available to common stockholders are the most directly comparable U.S. GAAP ~~measure~~measures to core earnings. Core earnings should not be considered as a substitute for net income (loss), net income (loss) available to common stockholders or income (loss) from continuing operations, net of tax, available to common stockholders and does not reflect the overall profitability of the Company’s business. Therefore, the Company believes that it is useful for investors to evaluate ~~both~~ net income (loss), net income (loss) available to common stockholders, income (loss) from continuing operations, net of tax, available to common stockholders and core earnings when reviewing the Company’s performance.

Reconciliation of Net Income to Core Earnings

Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
Net income (loss) $ 582
$ (40 ) $ 1,179
$ 338
Less: Net realized capital gains excluded from core earnings, before tax 50
53
20
76
Less: Loss on extinguishment of debt, before tax (6 ) —
(6 ) —
Less: Pension settlement, before tax —
(750 ) —
(750 )
Less: Integration and transaction costs associated with acquired business, before tax (11 ) —
(23 ) —
Less: Income tax benefit (expense) (11 ) 242
(2 ) 234
Less: Income from discontinued operations, after tax 148
112
317
187
Core earnings $ 412
$ 303
$ 873
$ 591



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Net income	$	372		$	582		$	1,002		$	1,179
Preferred stock dividends	—			—			5			—
Net income available to common stockholders	372			582			997			1,179
Adjustments to reconcile net income available to common stockholders to core earnings:
Net realized capital gains excluded from core earnings, before tax	(79		)	(50		)	(239		)	(20		)
Loss on extinguishment of debt, before tax	—			6			—			6
Loss on reinsurance transaction, before tax	91			—			91			—
Integration and transaction costs associated with acquired business, before tax	31			11			41			23
Change in loss reserves upon acquisition of a business, before tax	97			—			97			—
Income tax expense (benefit)	(27		)	11			5			2
Income from discontinued operations, net of tax	—			(148		)	—			(317		)
Core earnings	$	485		$	412		$	992		$	873

Core Earnings Margin-a non-GAAP financial measure that the Company uses to evaluate, and believes is an important measure of, the Group Benefits segment’s operating performance. Core earnings margin is calculated by dividing (a) core earnings by (b) revenues excluding buyouts and realized

gains (losses). Net income margin is the most directly comparable U.S. GAAP measure. The Company believes that core earnings margin provides investors with a valuable measure of the performance of Group Benefits because it reveals trends in the business that may be obscured by the effect of buyouts and

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

realized gains (losses).

on revenues or obscured by the effect on net income of realized capital gains (losses), integration costs, and the impact of Tax Reform on net deferred tax assets. Core earnings margin should not be considered as a substitute for net income margin and does not reflect the overall profitability of Group Benefits. Therefore, the Company believes it is important for investors to evaluate both net income margin and core earnings margin when reviewing performance. A reconciliation of net income margin to core earnings margin is set forth in the Results of Operations section within MD&A - Group Benefits.

Current Accident Year Catastrophe Ratio-a component of the loss and loss adjustment expense ratio, represents the ratio of catastrophe losses incurred in the current accident year (net of reinsurance) to earned premiums. For U.S. events, a catastrophe is an event that causes $25 or more in industry insured property losses and affects a significant number of property and casualty policyholders and insurers, as defined by the Property Claim Service office of Verisk. For international events, the Company's approach is similar, informed, in part, by how Lloyd's of London defines catastrophes. Lloyd's of London is an insurance market-place operating worldwide ("Lloyd's"). Lloyd's does not underwrite risks. The Company accepts risks as the sole member of Lloyd's Syndicate 1221 ("Lloyd's Syndicate"). The current accident year catastrophe ratio includes the effect of catastrophe losses, but does not include the effect of reinstatement premiums.

Expense Ratio-for the underwriting segments of Commercial Lines and Personal Lines is the ratio of underwriting expenses less fee income, to earned premiums. Underwriting

~~Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations~~

expenses include the amortization of deferred policy acquisition costs ("DAC") and insurance operating costs and expenses, including certain centralized services costs and bad debt expense. ~~Deferred policy acquisition costs~~DAC include commissions, taxes, licenses and fees and other incremental direct underwriting expenses and are amortized over the policy term.

The expense ratio for Group Benefits is expressed as the ratio of insurance operating costs and other expenses including amortization of intangibles and amortization of ~~deferred policy acquisition costs,~~DAC, to premiums and other considerations, excluding buyout premiums.

The expense ratio for Commercial Lines, Personal Lines and Group Benefits does not include integration and other transaction costs associated with an acquired business.

Fee Income-is largely driven from amounts earned as a result of contractually defined percentages of assets under management in our ~~Mutual~~Hartford Funds business. These fees are generally earned on a daily basis. Therefore, the growth in assets under management either through positive net flows or favorable market performance will have a favorable impact on fee income. Conversely, either negative net flows or unfavorable market performance will reduce fee income.

Loss and Loss Adjustment Expense Ratio-a measure of the cost of claims incurred in the calendar year divided by earned premium and includes losses and loss adjustment expenses incurred for both the current and prior accident years. Among other factors, the loss and loss adjustment expense ratio needed for the Company to achieve its targeted return on equity fluctuates from year to year based on changes in the expected investment yield over the claim settlement period,

the timing of expected claim settlements and the targeted returns set by management based on the competitive environment.

The loss and loss adjustment expense ratio is affected by claim frequency and claim severity, particularly for shorter-tail property lines of business, where the emergence of claim frequency and severity is credible and likely indicative of ultimate losses. Claim frequency represents the percentage change in the average number of reported claims per unit of exposure in the current accident year compared to that of the previous accident year. Claim severity represents the percentage change in the estimated average cost per claim in the current accident year compared to that of the previous accident year. As one of the factors used to determine pricing, the Company’s practice is to first make an overall assumption about claim frequency and severity for a given line of business and then, as part of the ~~ratemaking~~rate-making process, adjust the assumption as appropriate for the particular state, product or coverage.

Loss and Loss Adjustment Expense Ratio before Catastrophes and Prior Accident Year Development-a measure of the cost of non-catastrophe ~~claims~~loss and loss adjustment expenses incurred in the current accident year divided by earned premiums. Management believes that the current accident year loss and loss adjustment expense ratio before catastrophes is a performance measure that is useful to investors as it removes the impact of volatile and unpredictable catastrophe losses and prior accident year development.

Loss Ratio, excluding Buyouts-utilized for the Group Benefits segment and is expressed as a ratio of benefits, losses and loss adjustment expenses to premiums and other

considerations, excluding buyout premiums. Since Group Benefits occasionally buys a block of claims for a stated premium amount, the Company excludes this buyout from the loss ratio used for evaluating the profitability of the business as buyouts may distort the loss ratio. Buyout premiums represent takeover of open claim liabilities and other non-recurring premium amounts.

Mutual Fund and Exchange-Traded Product Assets-are owned by the shareholders of those products and not by the Company and, therefore, are not reflected in the Company’s ~~consolidated financial statements~~Condensed Consolidated Financial Statements except in instances where the Company seeds new investment products and holds an investment in the fund for a period of time. Mutual fund and ETP assets are a measure used by the Company primarily because a significant portion of the Company’s ~~Mutual~~Hartford Funds segment revenues are based upon asset values. These revenues increase or decrease with a rise or fall in AUM whether caused by changes in the market or through net flows.

New Business Written Premium-represents the amount of premiums charged for policies issued to customers who were not insured with the Company in the previous policy term. New business written premium plus renewal policy written premium equals total written premium.

Policies in Force- ~~represent~~ represents the number of policies with coverage in effect as of the end of the period. The number of policies in force is a growth measure used for Personal Lines and standard commercial lines (small commercial and middle market lines within middle & large commercial) within Commercial Lines and is affected by both new business growth and policy count retention.

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Policy Count Retention- represents the ratio of the number of policies renewed during the period divided by the number of policies available to renew. The number of policies available to renew represents the number of policies, net of any cancellations, written in the previous policy term. Policy count retention is affected by a number of factors, including the percentage of renewal policy quotes accepted and decisions by the Company to non-renew policies because of specific policy underwriting concerns or because of a decision to reduce premium writings in certain classes of business or states. Policy count retention is also affected by advertising and rate actions taken by competitors.

Policyholder Dividend Ratio- the ratio of policyholder dividends to earned premium.

Prior Accident Year Loss and Loss Adjustment Expense Ratio- represents the increase (decrease) in the estimated cost of settling catastrophe and non-catastrophe claims incurred in prior accident years as recorded in the current calendar year divided by earned premiums.

Reinstatement Premiums- represents additional ceded premium paid for the reinstatement of the amount of reinsurance coverage that was reduced as a result of ~~a reinsured loss recoverable by~~ the ~~Company.~~Company ceding losses to reinsurers.

Renewal Earned Price Increase (Decrease)-Written premiums are earned over the policy term, which is six months for certain Personal Lines automobile business and twelve months for substantially all of the remainder of the Company’s Property and Casualty business. Since the Company earns premiums over the six to twelve month term of the policies,

~~Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations~~

renewal earned price increases (decreases) lag renewal written price increases (decreases) by six to twelve months.

Renewal Written Price Increase (Decrease)-for Commercial Lines, represents the combined effect of rate changes, amount of insurance and individual risk pricing decisions per unit of exposure on standard commercial lines policies that renewed. For Personal Lines, renewal written price increases represent the total change in premium per policy since the prior year on those policies that renewed and includes the combined effect of rate changes, amount of insurance and other changes in exposure. For Personal Lines, other changes in exposure include, but are not limited to, the effect of changes in number of drivers, vehicles and incidents, as well as changes in customer policy elections, such as deductibles and limits. The rate component represents the change in rate filed with and approved by state regulators during the period and the amount of insurance represents the change in the value of the rating base, such as model year/vehicle symbol for automobiles, building replacement costs for property and wage inflation for workers’ compensation. A number of factors affect renewal written price increases (decreases) including expected loss costs as projected by the Company’s pricing actuaries, rate filings approved by state regulators, risk selection decisions made by the Company’s underwriters and marketplace competition. Renewal written price changes reflect the property and casualty insurance market cycle. Prices tend to increase for a particular line of business when insurance carriers have incurred significant losses in that line of business in the recent past or the industry as a whole commits less of its capital to writing exposures in that line of business. Prices tend to decrease when recent loss experience

has been favorable or when competition among insurance carriers increases. Renewal written price statistics are subject to change from period to period, based on a number of factors, including changes in actuarial estimates and the effect of subsequent cancellations and non-renewals, and modifications made to better reflect ultimate pricing achieved.

Return on Assets (“ROA”), Core Earnings- a non-GAAP financial measure that the Company uses to evaluate, and believes is an important measure of the ~~Mutual~~Hartford Funds segment’s operating performance. ROA, core earnings is calculated by dividing core earnings by a daily average AUM. ROA is the most directly comparable U.S. GAAP measure. The Company believes that ROA, core earnings, provides investors with a valuable measure of the performance of the ~~Mutual~~Hartford Funds segment because it reveals trends in our business that may be obscured by the effect of realized gains (losses). ROA, core earnings, should not be considered as a substitute for ROA and does not reflect the overall profitability of our ~~Mutual~~Hartford Funds business. Therefore, the Company believes it is important for investors to evaluate both ROA, and ROA, core earnings when reviewing the ~~Mutual~~Hartford Funds segment performance. A reconciliation of ROA to ROA, core earnings is set forth in the Results of Operations section within MD&A - ~~Mutual~~Hartford Funds.

Underlying Combined Ratio- a non-GAAP financial measure that represents the combined ratio before catastrophes, ~~and~~ prior accident year ~~development.~~development and change in current accident year loss reserves recorded upon acquisition of a business. Combined ratio is the most directly comparable U.S. GAAP measure. The Company believes the underlying combined ratio is an important measure of the trend in profitability since it removes the impact of volatile and unpredictable catastrophe losses and prior accident year loss and loss adjustment expense reserve ~~development.~~development and current accident year change in loss reserves upon acquisition of a business. A reconciliation of combined ratio to underlying combined ratio is set forth in the

Results of Operations section within MD&A - Commercial Lines and Personal Lines.

Underwriting Gain (Loss)-The Company's management evaluates profitability of the P&C businesses primarily on the basis of underwriting gain (loss). Underwriting gain (loss) is a before tax measure that represents earned premiums less incurred losses, loss adjustment expenses, amortization of ~~deferred policy acquisition costs,~~DAC, underwriting expenses, amortization of other intangible assets and dividends to policyholders. Underwriting gain (loss) is influenced significantly by earned premium growth and the adequacy of the Company's pricing. Underwriting profitability over time is also greatly influenced by the Company's pricing and underwriting discipline, which seeks to manage exposure to loss through favorable risk selection and diversification, its management of claims, its use of reinsurance and its ability to manage its expense ratio, which it accomplishes through economies of scale and its management of acquisition costs and other underwriting expenses. Net income (loss) is the most directly comparable GAAP measure. The Company believes that underwriting gain (loss) provides investors with a valuable measure of before tax profitability derived from underwriting activities, which are managed separately from the Company's investing activities. A reconciliation of net income (loss) to underwriting gain (loss) ~~to net income (loss) for~~is set forth in the Results of Operations section within MD&A - Commercial Lines, Personal Lines and Property & Casualty Other ~~Operations is set forth in segment sections~~Operations.

Part I - Item 2. Management's Discussion and Analysis of ~~MD&A.~~Financial Condition and Results of Operations

Written and Earned Premiums-Written premium ~~is a statutory accounting financial measure which~~ represents the amount of premiums charged for policies issued, net of reinsurance, during a fiscal period. ~~Earned premium is a U.S. GAAP and statutory measure.~~ Premiums are considered earned and are included in the financial results on a pro rata basis over the policy period. Management believes that written premium is a performance measure that is useful to investors as it reflects current trends in the Company’s sale of property and casualty insurance products. Written and earned premium are recorded net of ceded reinsurance premium.

Traditional life and disability insurance type products, such as those sold by Group Benefits, collect premiums from policyholders in exchange for financial protection for the policyholder from a specified insurable loss, such as death or disability. These premiums together with net investment income earned are used to pay the contractual obligations under these insurance contracts. Two major factors, new sales and persistency, impact premium growth. Sales can increase or decrease in a given year based on a number of factors, including but not limited to, customer demand for the Company’s product offerings, pricing competition, distribution channels and the Company’s reputation and ratings. Persistency refers to the percentage of premium remaining in-force from year-to-year.

THE HARTFORD’S OPERATIONS

Overview

The Hartford conducts business principally in five reporting segments including Commercial Lines, Personal Lines, Property & Casualty Other Operations, Group Benefits and ~~Mutual~~Hartford Funds, as well as a Corporate category. The Company includes in the

~~Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations~~

Corporate category investment management fees and expenses related to managing third party business, including management of the invested assets of the Talcott Resolution life and annuity run-off business sold in the second quarter of 2018 ("Talcott Resolution"), discontinued operations related to the ~~sale of Talcott Resolution,~~life and annuity business sold in May 2018, reserves for run-off structured settlement and terminal funding agreement liabilities, capital raising activities (including debt financing and related interest expense), purchase accounting adjustments related to goodwill and other expenses not allocated to the reporting segments. Corporate also includes investment management fees and expenses related to managing third party business, including management of the invested assets of Talcott Resolution Life, Inc. and its subsidiaries ("Talcott Resolution"). Talcott Resolution is the new holding company of the life and annuity business that we sold in May 2018. In addition, Corporate includes a 9.7% ownership interest in the ~~limited partnership~~legal entity that acquired ~~Talcott Resolution.~~the life and annuity business sold.

The Company derives its revenues principally from: (a) premiums earned for insurance coverage provided to insureds; (b) management fees on mutual fund and ETP assets; (c) net investment income; (d) fees earned for services provided to third parties; and (e) net realized capital gains and ~~losses; and (f) other revenues earned from its 9.7% ownership interest in the limited partnership that owns Talcott Resolution.~~losses. Premiums charged for insurance coverage are earned principally on a pro rata basis over the terms of the related policies in-force.

The profitability of the Company's property and casualty insurance businesses over time is greatly influenced by the Company’s underwriting discipline, which seeks to manage exposure to loss through favorable risk selection and diversification, its management of claims, its use of reinsurance, the size of its in force block, actual mortality and morbidity experience, and its ability to manage its expense ratio which it

accomplishes through economies of scale and its management of acquisition costs and other underwriting expenses. Pricing adequacy depends on a number of factors, including the ability to obtain regulatory approval for rate changes, proper evaluation of underwriting risks, the ability to project future loss cost frequency and severity based on historical loss experience adjusted for known trends, the Company’s response to rate actions taken by competitors, its expense levels and expectations about regulatory and legal developments. The Company seeks to price its insurance policies such that insurance premiums and future net investment income earned on premiums received will cover underwriting expenses and the ultimate cost of paying claims reported on the policies and provide for a profit margin. For many of its insurance products, the Company is required to obtain approval for its premium rates from state insurance ~~departments.~~departments and the Lloyd's Syndicate's ability to write business is subject to Lloyd's approval for its premium capacity each year.

Similar to Property & Casualty, profitability of the Group Benefits business depends, in large part, on the ability to evaluate and price risks appropriately and make reliable estimates of mortality, morbidity, disability and longevity. To manage the pricing risk, Group Benefits generally offers term insurance policies, allowing for the adjustment of rates or policy terms in order to minimize the adverse effect of market trends, loss costs, declining interest rates and other factors. However, as policies are typically sold with rate guarantees of up to three years, pricing for the Company’s products could prove to be inadequate if loss and expense trends

emerge adversely during the rate guarantee period. For some of its products, the Company is required to obtain approval for its premium rates from state insurance departments. New and renewal business for group benefits business, particularly for long-term disability, are priced using an assumption about expected investment yields over time. While the Company employs asset-liability duration matching strategies to mitigate risk and may use interest-rate sensitive derivatives to hedge its exposure in the Group Benefits investment portfolio, cash flow patterns related to the payment of benefits and claims are uncertain and actual investment yields could differ significantly from expected investment yields, affecting profitability of the business. In addition to appropriately evaluating and pricing risks, the profitability of the Group Benefits business depends on other factors, including the Company’s response to pricing decisions and other actions taken by competitors, its ability to offer voluntary products and self-service capabilities, the persistency of its sold business and its ability to manage its expenses which it seeks to achieve through economies of scale and operating efficiencies.

The financial results inof the Company’s mutual fund and ETP businesses depend largely on the amount of assets under management and the level of fees charged based, in part, on asset share class and product type. Changes in assets under management are driven by two main factors, net flows, and the market return of the funds, which isare heavily influenced by the return realized in the equity and bond markets. Net flows are comprised of new sales less redemptions by mutual fund and ETP shareholders. Financial results are highly correlated to the growth in assets under management since these products generally earn fee income on a daily basis.

The investment return, or yield, on invested assets is an important element of the Company’s earnings since insurance products are priced with the assumption that premiums received can be

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

invested for a period of time before benefits, losses and loss adjustment expenses are paid. Due to the need to maintain sufficient liquidity to satisfy claim obligations, the majority of the Company’s invested assets have been held in available-for-sale securities, including, among other asset classes, corporate bonds, municipal bonds, government debt, short-term debt, mortgage-backed securities, ~~and~~ asset-backed securities and collateralized ~~debt~~loan obligations.

The primary investment objective for the Company is to maximize economic value, consistent with acceptable risk parameters,

including the management of credit risk and interest rate sensitivity of invested assets, while generating sufficient ~~after~~net of tax income to meet policyholder and corporate obligations. Investment strategies are developed based on a variety of factors including business needs, regulatory requirements and tax considerations.

For further information on the Company's reporting segments refer to Part I, Item 1, Business - Reporting Segments in The Hartford’s ~~2017~~2018 Form 10-K Annual Report.

Financial Highlights



Net Income Available to Common Stockholders	Net Income Available to Common Stockholders per Diluted Share	Book Value per Diluted Share

Net income available to common stockholders decreased from second quarter 2018 primarily due to lower income from discontinued operations due to the sale in May 2018 of the life and annuity business, the loss on reinsurance and reserve increases totaling $188 before tax upon the acquisition of Navigators Group, higher non-catastrophe property losses, higher Property & Casualty underwriting expenses and transaction costs incurred for the acquisition, partially offset by lower current accident year catastrophes in Personal Lines, higher net investment income, an increase in net realized capital gains, a lower group disability loss ratio and lower interest expense.

Book value per diluted share increased from December 31, 2018, as a result of a 17% increase in common stockholders' equity resulting primarily from an increase in AOCI as well as net income in excess of dividends and share repurchases.

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

~~Financial Highlights~~



~~Net Income (Loss)~~	~~Net Income (Loss) per Diluted Share~~	~~Book Value per Diluted Share~~

~~Net income (loss)~~ of $582, or $1.62 per basic share and $1.60 per diluted share, increased from second quarter 2017 net loss of $40, or $0.11 per basic share and $0.11 per diluted share, primarily due to higher earnings from both continuing and discontinued operations. The higher income from continuing operations was primarily driven by a pension settlement charge of $488, after-tax, in second quarter 2017 and an increase in income in Commercial Lines, Group Benefits and Mutual Funds that was partially attributable to a lower corporate Federal income tax rate in 2018.

~~Book value per diluted share~~decreased to $34.44 from $37.11 as of December 31, 2017 as a result of a 7% decrease in stockholders' equity resulting primarily from a decrease in AOCI over the six month period, partially offset by net income in excess of shareholder dividends. AOCI decreased mainly due to the removal of AOCI related to Talcott Resolution upon the closing of the sale of that business, as well as lower net unrealized capital gains, driven by higher interest rates and wider credit spreads.



Net Investment Income	Annualized Investment Yield, ~~After~~Net of tax

Net investment income ~~of $428~~ increased 8%14% compared with second quarter ~~2017~~2018 primarily due to higher income from fixed maturities as a result of higher asset levels driven by the acquisition of ~~Aetna's U.S. group life~~Navigators Group, as well as higher income from limited partnerships and ~~disability business.~~other alternative investments.

Net ~~realized gains (losses)~~ ~~were relatively flat compared with net~~ realized capital gains inimproved from the second quarter ~~2017 ,~~2018, with gains in ~~2018~~2019 primarily driven by net gains on sales of fixed maturity securities driven by duration and credit management as well as appreciation in value of equity securities due to higher equity market ~~levels~~levels.

Annualized investment yield, net of tax, increased from second quarter 2018 primarily due to greater returns on limited partnerships and ~~tactical repositioning,~~other alternative investments, the ~~sale~~impact of ~~a private real estate~~average reinvestment rates higher than the sales/maturity yield during the past year, and higher short-term interest rates over the past year.

Net unrealized gains, net of tax, for fixed maturities in the investment ~~sales~~portfolio increased by $664 in second quarter 2019 primarily due to the effect of ~~fixed maturity securities,~~tighter credit spreads and ~~changes in value of non-qualifying~~lower interest ~~rate derivatives.~~

rates.



P&C Written Premiums	P&C Combined Ratio

Written premiums for Property & Casualty increased 12% compared with second quarter 2018 reflecting an increase in Commercial Lines, including the effect of the Navigators Group acquisition, partially offset by a decrease in Personal Lines. The Navigators Group acquisition contributed $190 of written premium in second quarter 2019, representing premium written from the May 23, 2019 acquisition date through quarter end.

Combined ratio forProperty & Casualty increased 4.2 points compared with second quarter 2018, largely due to reserve increases upon the acquisition of Navigators Group, higher non-catastrophe property losses, and a higher expense ratio, partially offset by lower current accident year catastrophe losses.

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

~~Annualized investment yield~~ ~~of 3.3%, after tax, increased from 3.0%, after tax, compared with second quarter 2017, primarily due to the effect of a lower corporate Federal income tax rate.~~

~~Net unrealized gains, after tax~~, for fixed maturities in the investment portfolio decreased by $1,138 in second quarter 2018 primarily due to the effect of higher interest rates, wider credit spreads and the reduction in assets due to the sale of Talcott Resolution.



~~Written Premiums~~	~~Combined Ratio~~

~~Written premiums~~ ~~for Property & Casualty decreased 1.5% compared with second quarter 2017 reflecting a decrease in Personal Lines, partially offset by an increase in Commercial Lines.~~

~~Combined ratio~~ ~~for~~Property & Casualty decreased 1.4 points to 95.7 compared with a combined ratio of 97.1 in second quarter 2017, largely due to a lower current accident year loss and loss adjustment expense ratio for auto and non-catastrophe property claims and more favorable prior accident year development, partially offset by higher catastrophe losses and a higher expense ratio.

Catastrophe losses of ~~$188,~~$138, before tax, ~~increased from~~were lower compared with catastrophe losses of ~~$155,~~$188, before tax, in second quarter ~~2017, largely due to a greater number of~~2018, driven by lower average severity on wind and hail events in the ~~second quarter of 2018.~~current year period.

Prior accident year developmentwas unfavorable $35, before tax, in the second quarter 2019, primarily due to increases in Navigators Group's prior accident year reserves upon acquisition of the business, partially offset by a decrease in reserves for workers' compensation, package business and 2017 catastrophes. Reserve development was a net favorable $47, before tax, in second quarter 2018, primarily due to a decrease in reserves for workers' compensation and for the 2017 hurricanes, partially offset by an increase in reserves for higher hazard general liability exposures in middle market. ~~Reserve development was a net favorable $10, before tax, in second quarter 2017, primarily due to a release of prior year catastrophe reserves.~~

Net Income Margin - Group Benefits

Net income margin on for Group Benefits ~~decreased to 6.3% from 7.5% in the~~increased compared with second quarter ~~2017,~~2018 primarily due to ~~lower~~greater net investment income and net realized capital gains, ~~integration costs incurred in the second quarter~~a lower group disability loss ratio, and lower amortization of ~~2018, and~~other intangible assets, partially offset by a slightly higher group life loss ratio, ~~partially offset by revenue growth~~

~~Part I - Item 2. Management's Discussion~~higher commission rates on voluntary products and ~~Analysis of Financial Condition and Results of Operations~~

~~due~~investments in technology. Contributing to the ~~acquisition of~~net income margin in both the ~~Aetna U.S. group life~~2019 and ~~disability business, an improvement in the expense ratio and an improved group disability loss ratio.~~2018 periods was favorable prior incurral year development.

CONSOLIDATED RESULTS OF OPERATIONS

The Consolidated Results of Operations should be read in conjunction with the Company's Condensed Consolidated Financial Statements and the related Notes beginning on page 67 as well as with the segment operating results sections of MD&A.

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Three Months Ended June 30, Six Months Ended June 30,
2018 2017 Change 2018 2017 Change
Earned premiums $ 3,958
$ 3,455
15 % $ 7,885
$ 6,893
14 %
Fee income 327
286
14 % 650
564
15 %
Net investment income 428
395
8 % 879
805
9 %
Net realized capital gains 52
55
(5 %) 22
79
(72 %)
Other revenues 24
23
4 % 44
42
5 %
Total revenues 4,789
4,214
14 % 9,480
8,383
13 %
Benefits, losses and loss adjustment expenses 2,738
2,420
13 % 5,433
4,844
12 %
Amortization of deferred policy acquisition costs 344
345
— % 686
689
— %
Insurance operating costs and other expenses 1,067
1,650
(35 %) 2,104
2,569
(18 %)
Loss on extinguishment of debt 6
—
NM
6
—
NM
Interest expense 79
79
— % 159
159
— %
Amortization of other intangible assets 18
1
NM
36
2
NM
Total benefits, losses and expenses 4,252
4,495
(5 %) 8,424
8,263
2 %
Income (loss) from continuing operations before income taxes 537
(281 ) NM
1,056
120
NM
Income tax expense (benefit) 103
(129 ) 180 % 194
(31 ) NM
Income from continuing operations, net of tax 434
(152 ) NM
862
151
NM
Income from discontinued operations, net of tax 148
112
32 % 317
187
70 %
Net income (loss) $ 582
$ (40 ) NM
$ 1,179
$ 338
NM



	Three Months Ended June 30,						Six Months Ended June 30,
	2019		2018		Change		2019		2018		Change
Earned premiums	$	4,166	$	3,958	5	%	$	8,106	$	7,885	3	%
Fee income	326		327		—	%	640		650		(2	%)
Net investment income	488		428		14	%	958		879		9	%
Net realized capital gains	80		52		54	%	243		22		NM
Other revenues	32		24		33	%	85		44		93	%
Total revenues	5,092		4,789		6	%	10,032		9,480		6	%
Benefits, losses and loss adjustment expenses	2,934		2,738		7	%	5,619		5,433		3	%
Amortization of deferred policy acquisition costs	392		344		14	%	747		686		9	%
Insurance operating costs and other expenses	1,141		1,067		7	%	2,189		2,104		4	%
Loss on extinguishment of debt	—		6		(100	%)	—		6		(100	%)
Loss on reinsurance transaction	91		—		NM		91		—		NM
Interest expense	63		79		(20	%)	127		159		(20	%)
Amortization of other intangible assets	15		18		(17	%)	28		36		(22	%)
Total benefits, losses and expenses	4,636		4,252		9	%	8,801		8,424		4	%
Income from continuing operations, before tax	456		537		(15	%)	1,231		1,056		17	%
Income tax expense	84		103		(18	%)	229		194		18	%
Income from continuing operations, net of tax	372		434		(14	%)	1,002		862		16	%
Income from discontinued operations, net of tax	—		148		(100	%)	—		317		(100	%)
Net income	372		582		(36	%)	1,002		1,179		(15	%)
Preferred stock dividends	—		—		—	%	5		—		NM
Net income available to common stockholders	$	372	$	582	(36	%)	$	997	$	1,179	(15	%)

Three months ended June 30, ~~2018~~2019 compared to the three months ended June 30, ~~2017~~2018

Net income ~~(loss)~~ ~~increased~~available to common stockholdersdecreased by ~~$622 with an increase in~~$210 attributable to lower income from ~~both continuing~~discontinued operations ~~and discontinued operations. Income from continuing operations increased by $586, primarily~~ due to ~~a pension settlement charge~~the sale in May 2018 of ~~$488, after tax, in~~ the ~~quarter ended June 30, 2017~~life and ~~an increase in income in Commercial Lines, Group Benefits~~annuity business, the loss on reinsurance and ~~Mutual Funds that was partially attributable to a lower corporate Federal income tax rate in 2018. The higher income from continuing operations was also attributable to a higher~~reserve increases totaling $188 before tax ~~underwriting gain in~~upon the acquisition of Navigators Group , higher non-catastrophe property losses, higher Property & Casualty ~~increased before tax income in Group Benefits due to favorable disability results~~underwriting expenses and ~~contribution from~~transaction costs incurred for the ~~fourth quarter 2017~~ acquisition, of the Aetna U.S. group life and disability benefits business, and higher earnings in Mutual Funds driven by an increase in assets under management. Contributing to the higher underwriting gain in Property & Casualty was more favorable prior accident year development, partially offset by ~~higher~~lower current accident year catastrophes ~~and~~in Personal Lines, higher net investment income, an increase in ~~insurance operating costs~~net realized capital gains, a lower group disability loss ratio and ~~other expenses.~~

lower interest expense.

Earned premiumsincreased by ~~$503~~$208 before tax, ~~primarily due to~~reflecting a 14% increase in Commercial Lines, including the ~~acquisition~~effect of the ~~Aetna U.S. group life~~Navigators Group acquisition, and ~~disability business~~a slight increase in ~~November 2017 that has increased earned premiums in the~~ Group Benefits, ~~segment. Earned premiums in Property and Casualty declined reflecting an 8% decline in Personal Lines,~~ partially offset by a ~~1% increase~~6% decrease in ~~Commercial~~Personal Lines. For a discussion of the Company's operating results by segment, see MD&A - Segment Operating Summaries.

Fee income~~increased by 14%~~ was relatively flat reflecting ~~increased~~reduced fee income in ~~Mutual~~Hartford Funds, ~~largely due to~~offset by higher ~~assets under management.~~fee income in Corporate resulting from fees earned on the management of the investment portfolio of the life and annuity business sold in May 2018.

Net investment incomeincreased by 8%14%, primarily due to greater income from fixed maturities as a result of higher ~~level of invested assets due to~~asset levels driven by the acquisition of ~~the Aetna U.S. group life~~Navigators Group, as well as higher income from limited partnerships and ~~disability business.~~other alternative investments. For further discussion of investment results, see MD&A - Investment Results, Net Investment Income.

Net realized capital gains of ~~$52~~$80 in ~~the~~ second quarter ~~of 2018 were relatively flat compared with net realized capital gains in the~~2019 increased from second quarter ~~of 2017,~~2018, with gains in ~~2018~~2019 primarily driven by net gains on sales of fixed maturity securities driven by duration and credit management trades and appreciation in value of equity securities due to higher equity market levels . For further discussion of investment results, see MD&A - Investment Results, Net Realized Capital Gains.

Other revenues for the three month period in 2019 included $3 of before tax income recognized on the 9.7% ownership interest in the legal entity that acquired the life and ~~tactical repositioning, the sale of a private real~~annuity business sold in May 2018.

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

estate investment, sales of fixed maturities, and changes in value of non-qualifying interest rate derivatives. For further discussion of investment results, see MD&A - Investment Results, Net Realized Capital Gains.

Benefits, losses and loss adjustment expenses ~~decreased~~ increased primarily in Property & Casualty ~~and increased~~due to an increase in ~~Group Benefits.~~Commercial Lines, partially offset by a decrease in Personal Lines. The increase in Commercial Lines was driven by an increase to Navigators Group ~~Benefits was largely due to the~~reserves upon acquisition of the ~~Aetna U.S. group life and disability~~ business and a higher ~~group life mortality, partially~~current accident year loss and loss adjustment expense ratio before catastrophes. The decrease in Personal Lines was primarily due to lower current accident year catastrophes. Benefits, losses and loss adjustment expenses for Group Benefits were relatively flat as the effect of higher earned premium was offset by a lower group disability loss ratio. ~~The net decrease in incurred losses for Property & Casualty was driven by:~~

Current accident year losses and loss adjustment expenses before catastrophes in Property & Casualty ~~decreased~~ ~~$112, before tax,~~increased, primarily resulting from higher non-catastrophe property losses and the effect of earned premium from the Navigators Group acquisition, partially offset by a lower personal auto liability loss ratio and the effect of lower ~~Personal Lines~~ earned premium ~~lower non-catastrophe property loss costs, partially offset by higher workers’ compensation claim frequency.~~

in Personal Lines.

Current accident year catastrophe losses of ~~$188~~,$138, before tax, for the three months endedJune 30, ~~2018~~,2019, compared to ~~$155~~,$188, before tax, for the prior year period. Catastrophe losses in 2019 were primarily from tornado, wind and hail events in various areas of the Midwest and South. Catastrophe losses in 2018 were primarily from wind and hail events in Colorado as well as wind and thunderstorm events across the Midwest, South and Mid-Atlantic. ~~Catastrophe losses in 2017 were primarily due to multiple wind and hail events across various U.S. geographic regions, primarily in the Midwest, Texas and Colorado.~~ For additional information, see MD&A - Critical Accounting Estimates, Property & Casualty Insurance Product Reserves, Net of Reinsurance.

Net prior accident year reserve development in Property & Casualty was ~~favorable~~ ~~$47~~,unfavorable net reserve development of $35, before tax, for the three months endedJune 30, ~~2018~~,2019, compared to favorable net reserve development of ~~$10~~,$47, before tax, for the prior year period. Prior accident year development in 2019 primarily included an increase in Navigators Group's prior accident year reserves, partially offset by a release of reserves for workers' compensation and 2017 catastrophes. Prior accident year development in 2018 primarily included a decrease in reserves for ~~workers’~~workers' compensation and a decrease in catastrophe reserves for the 2017 hurricanes, partially offset by a reserve increase for general liability. ~~Prior accident year development in 2017 was largely due to a decrease in catastrophe reserves.~~ For additional information, see MD&A - Critical Accounting Estimates, Property & Casualty Insurance Product Reserves, Net of Reinsurance.

Amortization of deferred policy acquisition costswas ~~relatively flat year over~~up from the prior year as an increase in Commercial Lines, which was driven by the impact of the Navigators Group acquisition, was partially offset by a decrease in Personal ~~Lines was largely offset by an increase in Commercial~~ Lines.

Insurance operating costs and other expenses ~~decreased~~ increased due to ~~a $750 pension settlement charge in the 2017 period, partially offset by an increase in~~transaction costs and operating costs ~~associated with~~incurred related to the Navigators Group acquisition, ~~of the Aetna U.S. group life~~higher information technology costs across Commercial Lines, Personal Lines and ~~disability business,~~Group Benefits, an increase in direct marketing expenses in Personal Lines to generate new business growth, ~~higher incentive-based compensation,~~and higher commissions in ~~middle market,~~Commercial Lines and higher variable expenses in Mutual Funds. In addition, in the three months ended June 30, 2018, the Company recognized an $8 before tax expense for Texas Windstorm Insurance Association (TWIA) assessments related to hurricane Harvey in 2017,Group Benefits. These increases were partially offset by lower incentive compensation and a ~~$12 reduction of loss based assessments~~decrease in ~~other states.~~Hartford Funds due to lower variable costs.

Amortization of other intangible assets

~~increased reflecting the~~decreased due to lower amortization of ~~customer relationship intangibles in the Group Benefits segment that arose~~intangible assets arising from the acquisition of ~~the Aetna~~Aetna's U.S. group life and disability

business.

Income tax expense~~increased~~decreased due to ~~an increase~~a decline in income before ~~tax income, partially offset by the effect of a lower corporate Federal income tax rate.~~taxes. Differences between the Company's effective income tax rate and the U.S. statutory rate of 21% ~~and 35% in 2018 and 2017, respectively,~~ are due primarily to tax-exempt interest earned on invested assets, stock-based compensation and ~~stock-based~~non-deductible executive compensation. For further discussion of income taxes, see Note 1211 - Income Taxes of Notes to Condensed Consolidated Financial Statements.

~~Income from discontinued operations net of tax~~ increased to $148 from $112 in the prior year quarter. The $148 of income from discontinued operations in the second quarter of 2018 was mostly attributable to recognizing tax benefits for additional net operating loss carryovers we expect to retain from the sale of Talcott Resolution due to a higher estimated tax basis of the operation sold.

Six months ended June 30, ~~2018~~2019 compared to the six months ended June 30, ~~2017~~2018

Net income ~~increased primarily~~ available to common stockholdersdecreased by $182 due to a ~~pension settlement charge of $488, after tax, in the six months ended June 30, 2017, a $130 increase~~reduction in income from discontinued operations due to the sale in May 2018 of the life and annuity business, partially offset by an increase in income ~~across Property & Casualty, Group Benefits and Mutual Funds that was partially attributable~~from continuing operations. Income from continuing operations, net of tax, increased by $140 primarily due to an increase in net realized capital gains, higher net investment income, a lower corporate Federal income tax rate in 2018. Within Property & Casualty, an improvement in before tax earnings was mostly driven by favorable prior accident year development related to workers’ compensation and 2017 catastrophe events and due to improved Personal Lines auto results. The improvementdisability loss ratio in Group Benefits, ~~income~~lower interest expense, and earnings from the Company's retained equity interest in the former life and annuity operations. These increases were partially offset by the effect of the loss on reinsurance and reserve increases totaling $188 before tax ~~was largely due to revenue growth, including from~~upon the acquisition of ~~the Aetna U.S. group life~~Navigators Group, higher non-catastrophe property losses and ~~disability benefits business, and the~~ higher ~~earnings in Mutual Funds was driven~~underwriting expenses.

Earned premiumsincreased by an$221 before tax, reflecting a 9% increase in ~~assets under management.~~

~~Earned premiums~~ ~~increased by 14% or $992, before tax, primarily due to~~Commercial Lines, including the ~~acquisition~~effect of the ~~Aetna U.S. group life~~Navigators Group acquisition, and ~~disability benefits business that has increased earned premiums~~a 1% increase in ~~our~~ Group Benefits, ~~segment. Earned premiums in Property and Casualty declined reflecting an 8% decline in Personal Lines,~~ partially offset by a ~~1% increase~~7% decline in ~~Commercial~~Personal Lines. For a discussion of the Company's operating results by segment, see MD&A - Segment Operating Summaries.

Fee income~~increased~~decreased by ~~15%~~2% reflecting ~~increased~~lower fee income in ~~Mutual~~Hartford Funds largely due to ~~higher~~lower average daily assets under ~~management.~~management, partially offset by higher fee income in Corporate resulting from fees earned on the management of the investment portfolio of the life and annuity business sold in May 2018.

Net investment incomeincreased by 9% primarily due to a higher ~~level of invested assets due to~~asset levels driven by the acquisition of Navigators Group, average reinvestment rates higher than the ~~Aetna U.S. group life~~sales/maturity yield during the past year, higher short-term interest rates, and ~~disability business as well as~~ higher ~~income from limited partnerships and other alternative~~returns on equity investments. For further discussion of investment results, see MD&A - Investment Results, Net Investment Income.

Net realized capital gains of ~~$22 in~~$243 for the six months ended June 30, 2019, improved from the six months ended June 30, 2018, ~~were lower than net realized capital~~with gains in ~~the prior year period. Net gains in 2018 were~~2019 primarily driven by appreciation in value of equity securities due to higher equity market levels and net gains on sales in 2019 of fixed maturity securities driven by duration and credit management trades. For further discussion of investment results, see MD&A - Investment Results, Net Realized Capital Gains.

Other revenuesfor the six months ended June 30, 2019 included $31 of before tax income recognized on the 9.7% ownership interest in the legal entity that acquired the life and annuity business sold in May 2018.

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

appreciation of equity securities, due to higher equity market levels and tactical repositioning, as well as a gain on the sale of a private real estate investment. These gains were partially offset by net losses on sales of fixed maturity securities driven by duration, liquidity and credit management. For further discussion of investment results, see MD&A - Investment Results, Net Realized Capital Gains .

Benefits, losses and loss adjustment expenses ~~decreased~~ increased in Property & Casualty, and increased in Group Benefits with the increase in Group Benefits primarily due to the effect of growth in earned premium largely resulting from the acquisition of the Aetna U.S. group life an disability business and a higher group life loss ratio, partially offset by a ~~lower group disability loss ratio. The net~~ decrease in ~~incurred losses~~Group Benefits. The increase for Property & Casualty was driven ~~by:~~by an increase in Commercial Lines due to an increase in Navigators Group reserves upon acquisition of the business, the effect of losses on earned premium from the acquired business, and a higher current accident year loss and loss adjustment expense ratio before catastrophes, partially offset by a decrease in Personal Lines primarily due to lower current accident year catastrophes and a lower current accident year loss ratio before catastrophes. The decrease in Group Benefits was largely due to a lower group disability loss ratio, including favorable prior incurral year development.

Current accident year ~~loss~~losses and loss adjustment expenses before catastrophes in Property & Casualty ~~decreased $187, before tax, primarily resulting from~~increased due to a higher workers' compensation loss ratio and the effect of higher earned premium in Commercial Lines, including the impact of the Navigators Group acquisition, partially offset by a lower personal auto liability loss ratio and the effect of lower ~~Personal Lines~~ earned premium ~~as well as lower non-catastrophe property loss costs.~~in Personal Lines.

Current accident year catastrophe losses of ~~$291~~,$242, before tax, for the six months endedJune 30, ~~2018~~ ~~were down modestly~~2019, compared to ~~$305~~,$291, before tax, for the prior year period. Catastrophe losses in 2019 were primarily from tornado, wind and hail events in the South and Midwest and winter storms across the country. Catastrophe losses in 2018 were primarily from multiple wind and hail events in Colorado, the Midwest, South and Mid-Atlantic as well as from East ~~coast~~Coast winter storms. ~~Catastrophe losses in 2017 were primarily due to multiple wind and hail events across various U.S. geographic regions, primarily in the Midwest, Colorado, Texas and the Southeast.~~ For additional information, see MD&A - Critical Accounting Estimates, Property & Casualty Insurance Product Reserves, Net of Reinsurance.

Net prior accident year reserve development in Property & Casualty was ~~favorable~~ ~~$79~~,a net unfavorable $24, before tax, for the six months endedJune 30, ~~2018~~,2019, compared to ~~unfavorable~~favorable net reserve development of $2,$79, before tax, for the prior year period. Prior accident year development in 2019 primarily included increases in Navigators Group reserves upon acquisition of the business, partially offset by reserve decreases for workers’ compensation,

catastrophes, and package business. Prior accident year development in 2018 ~~primarily~~ included a decrease in reserves for ~~workers’~~workers' compensation and a decrease in catastrophe reserves for the 2017 hurricanes, partially offset by a reserve increase for general liability.

For additional information, see MD&A - Critical Accounting Estimates, Property & Casualty Insurance Product Reserves, Net of Reinsurance.

Amortization of deferred policy acquisition costswas ~~relatively flat~~up from the prior year ~~over year~~period as ~~a decrease in~~

~~Personal Lines was largely offset by~~ an increase in Commercial Lines, including the impact from the Navigators Group acquisition, and an increase in Group Benefits were partially offset by a decrease in Personal Lines.

Insurance operating costs and other expenses increased due to higher information technology and operations costs in both Commercial Lines and Personal Lines, an increase in direct marketing expenses in Personal Lines to generate new business growth and higher commissions as well as transaction costs and operating costs incurred related to the Navigators Group acquisition. The increase in Property & Casualty was partially offset by lower incentive compensation and by a decrease in Hartford Funds due to lower variable costs.

Amortization of other intangible assetsdecreased due to ~~a $750 pension settlement charge in the 2017 period, partially offset by an increase in operating costs associated with~~lower amortization of intangible assets arising from the acquisition of ~~the Aetna~~Aetna's U.S. group life and disability ~~business, higher incentive-based compensation, increased commissions in Commercial Lines, and higher variable expenses in Mutual Funds.~~business.

~~Amortization of other intangible assetsincreased reflecting the amortization of customer relationship intangibles in the Group Benefits segment that arose from the acquisition of the Aetna U.S. group life and disability business.~~

Income tax expenseincreased primarily due to an increase in before tax ~~income, partially offset by the effect of a lower corporate Federal income tax rate.~~income. Differences between the Company's effective income tax rate and the U.S. statutory rate of 21% ~~and 35% in 2018 and 2017, respectively,~~ are due primarily to tax-exempt interest earned on invested assets, stock-based compensation and ~~stock-based~~non-deductible executive compensation. For further discussion of income taxes, see Note 1211 - Income Taxes of Notes to Condensed Consolidated Financial Statements.

~~Income from discontinued operations net of tax~~ increased to $317 from $187 in the prior year period. The $317 of income from discontinued operations in the first half of 2018 was mostly attributable to recognizing additional retained tax benefits from the sale of the Talcott Resolution life and annuity run-off business and the reclassification of $193 of stranded tax effects from AOCI to retained earnings related to the sale of Talcott Resolution, both of which reduced the estimated loss on sale. The reclassification of stranded tax effects resulted in a corresponding increase in AOCI related to the assets held for sale. For more information on the reclassification of stranded tax effects, see Note 1 - Basis of Presentation and Significant Accounting Policies of Notes to Condensed Consolidated Financial Statements. Refer to the Corporate category MD&A discussion for more information about operating earnings from the Talcott Resolution life and annuity run-off business held for sale recognized up until the sale closed on May 31, 2018.

INVESTMENT RESULTS



Composition of Invested Assets
	June 30, 2019				December 31, 2018
	Amount		Percent		Amount		Percent
Fixed maturities, available-for-sale ("AFS"), at fair value	$	41,166	81.1	%	$	35,652	76.2	%
Fixed maturities, at fair value using the fair value option ("FVO")	49		0.1	%	22		—	%
Equity securities, at fair value	1,533		3.0	%	1,214		2.6	%
Mortgage loans	3,612		7.1	%	3,704		7.9	%
Limited partnerships and other alternative investments	1,734		3.4	%	1,723		3.7	%
Other investments [1]	311		0.6	%	192		0.4	%
Short-term investments	2,364		4.7	%	4,283		9.2	%
Total investments	$	50,769	100.0	%	$	46,790	100.0	%


[1]	Primarily consists of investments of consolidated investment funds and derivative instruments which are carried at fair value.

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

~~INVESTMENT RESULTS~~

Composition of Invested Assets
June 30, 2018 December 31, 2017
Amount Percent Amount Percent
Fixed maturities, available-for-sale ("AFS"), at fair value $ 36,194
79.3 % $ 36,964
81.9 %
Fixed maturities, at fair value using the fair value option ("FVO") 36
0.1 % 41
0.1 %
Equity securities, at fair value [1] 1,003
2.2 %
Equity securities, AFS, at fair value [1] 1,012
2.3 %
Mortgage loans 3,355
7.3 % 3,175
7.0 %
Limited partnerships and other alternative investments 1,670
3.7 % 1,588
3.5 %
Other investments [2] 94
0.2 % 96
0.2 %
Short-term investments 3,296
7.2 % 2,270
5.0 %
Total investments $ 45,648
100.0 % $ 45,146
100.0 %


~~[1]~~	Effective January 1, 2018, with the adoption of new accounting standards for financial instruments, equity securities, AFS were reclassified to equity securities at fair value and are excluded from the table above as of June 30, 2018.


~~[2]~~	~~Primarily relates to derivative instruments.~~

June 30, ~~2018~~2019 compared to December 31, ~~2017~~2018

~~Total investments~~Fixed maturities, AFSincreased primarily due to ~~an increase~~the transfer in ~~short-term investments offset by a decrease in~~of fixed maturities, ~~AFS.~~

~~Fixed maturities,~~ AFS ~~decreased primarily due~~ related to ~~a decrease~~the acquisition of Navigators Group as well as an increase in valuations due to ~~higher~~lower interest rates and ~~wider~~tighter credit spreads.

Short-term investments ~~increased largely~~decreased due to ~~proceeds from~~ the ~~sale~~funding of ~~Talcott Resolution, partially offset by a decline in the Company's securities lending agreements.~~Navigators Group acquisition.

																																									Net Investment Income
	Three Months Ended June 30,										Six Months Ended June 30,										Three Months Ended June 30,										Six Months Ended June 30,
	2018					2017					2018					2017					2019					2018					2019					2018
(Before tax)	Amount			Yield [1]		Amount			Yield [1]		Amount			Yield [1]		Amount			Yield [1]		Amount			Yield [1]		Amount			Yield [1]		Amount			Yield [1]		Amount			Yield [1]
Fixed maturities [2]	$	358		3.9	%	$	326		4.0	%	$	707		3.9	%	$	645		4.0	%	$	386		3.9	%	$	358		3.9	%	$	767		3.9	%	$	707		3.9	%
Equity securities	6			2.4	%	5			2.6	%	12			2.4	%	10			2.4	%	12			3.4	%	6			2.4	%	19			2.9	%	12			2.4	%
Mortgage loans	34			4.2	%	30			4.1	%	67			4.2	%	60			4.1	%	41			4.5	%	34			4.2	%	81			4.4	%	67			4.2	%
Limited partnerships and other alternative investments	39			9.5	%	39			10.1	%	112			14.3	%	97			13.0	%	60			13.9	%	39			9.5	%	116			13.9	%	112			14.3	%
Other [3]	9					11					17					26					7					9					16					17
Investment expense	(18		)			(16		)			(36		)			(33		)			(18		)			(18		)			(41		)			(36		)
Total net investment income	$	428		3.9	%	$	395		4.1	%	$	879		4.1	%	$	805		4.2	%	$	488		4.2	%	$	428		3.9	%	$	958		4.1	%	$	879		4.1	%
Total net investment income excluding limited partnerships and other alternative investments	$	389		3.7	%	$	356		3.8	%	$	767		3.7	%	$	708		3.8	%	$	428		3.8	%	$	389		3.7	%	$	842		3.8	%	$	767		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]	~~Primarily includes~~Includes income from derivatives that qualify for hedge accounting and hedge fixed maturities.

Three and six months ended June 30, ~~2018,~~2019 compared to the three and six months ended June 30, ~~2017~~2018

Total net investment income increased primarily due to higher income from fixed maturities as a result of higher asset levels driven by the acquisition of ~~Aetna's U.S. group life and disability business. In addition, for the six month period, total net~~

~~investment~~Navigators Group as well as higher income ~~increased due to~~from limited partnerships and other alternative ~~investments as a result of higher returns on private equity~~ investments.

Annualized net investment income yield,excluding limited partnerships and other alternative investments ~~was 3.7% for the six months ended June 30, 2018~~ and ~~3.8% for the same period in 2017. Excluding~~ non-routine items, which primarily include prepayment penalties on mortgage loans and

~~Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations~~

make-whole payments on fixed maturities, ~~the annualized investment income yield~~ was ~~3.6%~~3.7% for the six ~~months ended June 30, 2018, down~~month period in 2019, up from ~~3.7%~~3.6% for the same period ~~in 2017.~~for 2018.

~~New money yield~~

Average reinvestment rate for the 2019 six month period, excluding certain U.S. Treasury securities and cash equivalent securities, ~~for the six months ended June 30, 2018,~~ was approximately ~~3.9%~~3.7% which was ~~above~~below the average yield of sales and maturities of ~~3.5%~~4.0% for the same period. For the 2019 six ~~months ended June 30, 2018,~~month period, the average reinvestment rate of ~~3.9% increased~~3.7% decreased from ~~3.5%~~3.9% for the 2018 six month period, ~~in 2017,~~ due to ~~higher~~lower interest rates.

~~Though new money~~Despite the recent decline in reinvestment rates, ~~have risen, as investment income in 2018 will include the lower yield on Aetna group life and~~

~~disability assets that were recorded at current yields as of the November 1, 2017 acquisition date,~~ we expect the annualized net investment income yield for the ~~2018~~2019 calendar year, excluding limited partnerships and other alternative investments, to approximate the portfolio yield earned in ~~2017 though it could be higher depending on the level of non-routine income and if reinvestment rates stay above the sales/maturity yield.~~2018. The estimated impact on net investment income yield is subject to change as the composition of the portfolio changes through portfolio management and changes in market conditions.

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Net Realized Capital Gains
Three Months Ended June 30, Six Months Ended June 30,
(Before tax) 2018 2017 2018 2017
Gross gains on sales $ 46
$ 77
$ 65
$ 138
Gross losses on sales (31 ) (22 ) (88 ) (68 )
Equity securities [1] 26
—
42
—
Net other-than-temporary impairment ("OTTI") losses recognized in earnings [2] —
(2 ) —
(3 )
Transactional foreign currency revaluation —
8
1
14
Non-qualifying foreign currency derivatives 4
(7 ) 1
(14 )
Other, net [3] 7
1
1
12
Net realized capital gains $ 52
$ 55
$ 22
$ 79



Net Realized Capital Gains
	Three Months Ended June 30,						Six Months Ended June 30,
(Before tax)	2019			2018			2019			2018
Gross gains on sales	$	69		$	46		$	113		$	65
Gross losses on sales	(19		)	(31		)	(40		)	(88		)
Equity securities [1]	30			26			162			42
Net other-than-temporary impairment ("OTTI") losses recognized in earnings [2]	—			—			(2		)	—
Valuation allowances on mortgage loans [2]	1			—			1			—
Transactional foreign currency revaluation	—			—			—			1
Non-qualifying foreign currency derivatives	(1		)	4			—			1
Other, net [3]	—			7			9			1
Net realized capital gains	$	80		$	52		$	243		$	22

[1]

~~Effective January 1, 2018, with adoption of new accounting standards for equity securities at fair value, includes~~


[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, ~~and~~ including credit ~~derivatives.~~derivatives and interest rate derivatives used to manage duration.

Three and six months ended June 30, ~~2018~~2019

Gross gains and losses on sales were primarily the result of duration, liquidity and credit management within U.S. treasury securities, corporate securities, and tax-exempt municipal bonds.

Equity securities net gains were primarily driven by appreciation of equity securities due to higher equity market levels.

Other, net gainsfor the six month period were primarily due to gains on credit derivatives of $27 driven by credit spread tightening, partially offset by losses on interest rate derivatives of $15 due to a decline in interest rates.

Three and six months ended June 30, 2018

Gross gains and losses on saleswere primarily the result of duration, liquidity and credit management within corporate securities, U.S. treasury securities, and tax-exempt municipal bonds as well as the sale of a private real estate investment.

Equity securitiesnet gains were driven by sales and appreciation of equity securities due to higher equity market levels and tactical repositioning.

Other, net gainsfor the three month period were primarily due to gains of $8 on interest rate derivatives due to an increase in interest rates.

~~Three and six months ended June 30, 2017~~

~~Gross gains and losses on saleswere primarily the result of duration, liquidity and credit management within corporate securities, equity securities, residential mortgage-backed securities ("RMBS") and U.S. treasury securities.~~

~~Other, net gains~~ ~~for the six month period were primarily due to gains of $8 on credit derivatives as a result of credit spread~~

~~tightening and gains of $3 on interest rate derivatives used to manage duration.~~

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ, and in the past have differed, from those estimates.

The Company has identified the following estimates as critical in that they involve a higher degree of judgment and are subject to a significant degree of variability:

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

~~Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations~~

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.

Certain of these estimates are particularly sensitive to market conditions, and deterioration and/or volatility in the worldwide debt or equity markets could have a material impact on the Condensed Consolidated Financial Statements. In developing these estimates, management makes subjective and complex judgments that are inherently uncertain and subject to material change as facts and circumstances develop. Although variability is inherent in these estimates, management believes the amounts

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

provided are appropriate based upon the facts available upon compilation of the financial statements.

The Company’s critical accounting estimates are discussed in Part II, Item 7 MD&A in the Company’s ~~2017~~2018 Form 10-K Annual Report. In addition, Note 1 - Basis of Presentation and Significant Accounting Policies of Notes to Consolidated Financial Statements included in the Company's ~~2017~~2018 Form 10-K Annual Report should be read in conjunction with this section to assist with obtaining an understanding of the underlying accounting policies related to these estimates. The following discussion updates certain of the Company’s critical accounting estimates as of June 30, ~~2018.~~2019.

Property & Casualty Insurance Product Reserves, Net of Reinsurance

P&C Loss and Loss Adjustment Expense ("LAE") Reserves of ~~$19,859,~~$22,623, Net of Reinsurance, by Segment as of June 30, ~~2018~~2019

Based on the results of the quarterly reserve review process, the Company determines the appropriate reserve adjustments, if any, to record. Recorded reserve estimates are adjusted after consideration of numerous factors, including but not limited to, the magnitude of the difference between the actuarial indication and the recorded reserves, improvement or deterioration of actuarial indications in the period, the maturity of the accident year, trends observed over the recent past and the level of volatility within a particular line of business. In general, adjustments are made more quickly to more mature accident years and less volatile lines of business. Such adjustments of reserves are referred to as “prior accident year development”. Increases in previous estimates of ultimate loss costs are referred to as either an increase in prior accident year reserves or as unfavorable reserve development. Decreases in previous estimates of ultimate loss costs are referred to as either a decrease in prior accident year reserves or as favorable reserve development. Reserve development can influence the comparability of year over year underwriting results and is set forth in the paragraphs and tables that follow.

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

~~Rollforward of Property and Casualty Insurance Product Liabilities for Unpaid Losses and LAE for the Six Months Ended June 30, 2018~~


Rollforward of Property and Casualty Insurance Product Liabilities for Unpaid Losses and LAE for the Six Months Ended June 30, 2019												Rollforward of Property and Casualty Insurance Product Liabilities for Unpaid Losses and LAE for the Six Months Ended June 30, 2019
	Commercial Lines			Personal Lines			Property & Casualty Other Operations		Total Property & Casualty Insurance			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		$	19,455	$	2,456	$	2,673	$	24,584
Reinsurance and other recoverables	3,147			71			739		3,957			3,137		108		987		4,232
Beginning liabilities for unpaid losses and loss adjustment expenses, net	15,746			2,223			1,849		19,818			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	1,948			1,123			—		3,071			2,216		1,017		—		3,233
Current accident year ("CAY") catastrophes	143			148			—		291			160		82		—		242
Prior accident year development ("PYD")	(92		)	(3		)	16		(79		)	12		3		9		24
Total provision for unpaid losses and loss adjustment expenses	1,999			1,268			16		3,283			2,388		1,102		9		3,499
Less: payments	1,784			1,331			127		3,242			1,886		1,261		82		3,229
Ending liabilities for unpaid losses and loss adjustment expenses, net	15,961			2,160			1,738		19,859			18,821		2,189		1,613		22,623
Reinsurance and other recoverables	3,059			22			691		3,772			4,039		112		974		5,125
Ending liabilities for unpaid losses and loss adjustment expenses, gross	$	19,020		$	2,182		$	2,429	$	23,631		$	22,860	$	2,301	$	2,587	$	27,748
Earned premiums and fee income	$	3,473		$	1,735							$	3,782	$	1,619
Loss and loss expense paid ratio [1]	51.4			76.7								49.9		77.9
Loss and loss expense incurred ratio	57.8			73.9								63.4		68.9
Prior accident year development (pts) [2]	(2.7		)	(0.2		)						0.3		0.2


[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 Six Months Ended June 30, 2018, Net of Reinsurance~~


Current Accident Year Catastrophe Losses for the Six Months Ended June 30, 2019, Net of Reinsurance							Current Accident Year Catastrophe Losses for the Six Months Ended June 30, 2019, Net of Reinsurance
	Commercial Lines		Personal Lines		Total		Commercial Lines		Personal Lines		Total
Wind and hail	$	83	$	123	$	206	$	95	$	63	$	158
Winter storms	59		22		81		60		19		79
Flooding	1		1		2		1		—		1
Volcanic eruption	—		2		2
Other							4		—		4
Total catastrophe losses	$	143	$	148	$	291	$	160	$	82	$	242

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

~~Unfavorable (Favorable) Prior Accident Year Development for the Three Months Ended June 30, 2018~~


Unfavorable (Favorable) Prior Accident Year Development for the Three Months Ended June 30, 2019												Unfavorable (Favorable) Prior Accident Year Development for the Three Months Ended June 30, 2019
	Commercial Lines			Personal Lines			Property & Casualty Other Operations		Total Property & Casualty Insurance			Commercial Lines			Personal Lines		Property & Casualty Other Operations		Total Property & Casualty Insurance
Workers’ compensation	$	(48	)	$	—		$	—	$	(48	)	$	(30	)	$	—	$	—	$	(30	)
Workers’ compensation discount accretion	10			—			—		10			9			—		—		9
General liability	20			—			—		20			37			—		—		37
Marine												10			—		—		10
Package business	(15		)	—			—		(15		)	(14		)	—		—		(14		)
Commercial property	1			—			—		1			(13		)	—		—		(13		)
Professional liability	6			—			—		6			33			—		—		33
Bond	—			—			—		—			—			—		—		—
Assumed Reinsurance												3			—		—		3
Automobile liability	(5		)	—			—		(5		)	2			—		—		2
Homeowners	—			(1		)	—		(1		)	—			—		—		—
Net asbestos reserves	—			—			—		—			—			—		—		—
Net environmental reserves	—			—			—		—			—			—		—		—
Catastrophes	(44		)	13			—		(31		)	(16		)	2		—		(14		)
Uncollectible reinsurance	—			—			11		11			—			—		—		—
Other reserve re-estimates, net	2			(2		)	5		5			1			2		9		12
Total prior accident year development	$	(73	)	$	10		$	16	$	(47	)	$	22		$	4	$	9	$	35



Unfavorable (Favorable) Prior Accident Year Development for the Six Months Ended June 30, 2019
	Commercial Lines			Personal Lines			Property & Casualty Other Operations		Total Property & Casualty Insurance
Workers’ compensation	$	(50	)	$	—		$	—	$	(50	)
Workers’ compensation discount accretion	17			—			—		17
General liability	43			—			—		43
Marine	10			—			—		10
Package business	(9		)	—			—		(9		)
Commercial property	(15		)	—			—		(15		)
Professional liability	33			—			—		33
Bond	—			—			—		—
Assumed Reinsurance	3			—			—		3
Automobile liability	2			(5		)	—		(3		)
Homeowners	—			1			—		1
Net asbestos reserves	—			—			—		—
Net environmental reserves	—			—			—		—
Catastrophes	(28		)	6			—		(22		)
Uncollectible reinsurance	—			—			—		—
Other reserve re-estimates, net	6			1			9		16
Total prior accident year development	$	12		$	3		$	9	$	24

Workers’ compensation reserveswere reduced, principally in small commercial driven by lower than previously estimated claim severity for the 2014 through 2017 accident years.

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Navigators Group book of business related to U.S. construction, premises liability, products liability and excess casualty, mostly related to accident years 2014 to 2018.

Package business reserveswere decreased, primarily due to favorable emergence on property claims related to accident years 2016 through 2018.

Professional liability reserveswere increased, primarily due to large loss activity, including wrongful termination and discrimination claims, in accident years 2017 and 2018 and

increased estimated frequency and severity of directors’ and officers’ reserves on the Navigators Group book of business, principally for the 2014 to 2018 accident years.

Marine reserveswere increased, principally related to pollution exposure from the 1980s and 1990s related to the Navigators Group book of business.

Automobile liability reserveswere reduced, primarily driven by the emergence of lower estimated severity in personal automobile liability for accident year 2017.

Catastrophes reserves were reduced, primarily as a result of lower estimated net losses from 2017 hurricanes Harvey and Irma.



Rollforward of Property and Casualty Insurance Product Liabilities for Unpaid Losses and LAE for the Six Months Ended June 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	1,948			1,123			—		3,071
Current accident year catastrophes	143			148			—		291
Prior accident year development	(92		)	(3		)	16		(79		)
Total provision for unpaid losses and loss adjustment expenses	1,999			1,268			16		3,283
Less: payments	1,784			1,331			127		3,242
Ending liabilities for unpaid losses and loss adjustment expenses, net	15,961			2,160			1,738		19,859
Reinsurance and other recoverables	3,059			22			691		3,772
Ending liabilities for unpaid losses and loss adjustment expenses, gross	$	19,020		$	2,182		$	2,429	$	23,631
Earned premiums and fee income	$	3,473		$	1,735
Loss and loss expense paid ratio [1]	51.4			76.7
Loss and loss expense incurred ratio	57.8			73.9
Prior accident year development (pts) [2]	(2.7		)	(0.2		)


[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.

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations



Current Accident Year Catastrophe Losses for the Six Months Ended June 30, 2018, Net of Reinsurance
	Commercial Lines		Personal Lines		Total
Wind and hail	$	83	$	123	$	206
Winter storms	59		22		81
Flooding	1		1		2
Volcanic eruption	—		2		2
Total catastrophe losses	$	143	$	148	$	291



Unfavorable (Favorable) Prior Accident Year Development for the Three Months Ended June 30, 2018
	Commercial Lines			Personal Lines			Property & Casualty Other Operations		Total Property & Casualty Insurance
Workers’ compensation	$	(48	)	$	—		$	—	$	(48	)
Workers’ compensation discount accretion	10			—			—		10
General liability	20			—			—		20
Package business	(15		)	—			—		(15		)
Commercial property	1			—			—		1
Professional liability	6			—			—		6
Bond	—			—			—		—
Automobile liability	(5		)	—			—		(5		)
Homeowners	—			(1		)	—		(1		)
Net asbestos reserves	—			—			—		—
Net environmental reserves	—			—			—		—
Catastrophes	(44		)	13			—		(31		)
Uncollectible reinsurance	—			—			11		11
Other reserve re-estimates, net	2			(2		)	5		5
Total prior accident year development	$	(73	)	$	10		$	16	$	(47	)



Unfavorable (Favorable) Prior Accident Year Development for the Six Months Ended June 30, 2018
	Commercial Lines			Personal Lines			Property & Casualty Other Operations		Total Property & Casualty Insurance
Workers’ compensation	$	(73	)	$	—		$	—	$	(73	)
Workers’ compensation discount accretion	20			—			—		20
General liability	28			—			—		28
Package business	(7		)	—			—		(7		)
Commercial property	(12		)	—			—		(12		)
Professional liability	8			—			—		8
Bond	—			—			—		—
Automobile liability	(10		)	—			—		(10		)
Homeowners	—			(13		)	—		(13		)
Net asbestos reserves	—			—			—		—
Net environmental reserves	—			—			—		—
Catastrophes	(52		)	18			—		(34		)
Uncollectible reinsurance	—			—			11		11
Other reserve re-estimates, net	6			(8		)	5		3
Total prior accident year development	$	(92	)	$	(3	)	$	16	$	(79	)

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

General liability reserveswere increased, primarily due to an increase in reserves for higher hazard general liability

exposures in middle market for accident years 2009 to 2017, partially offset by a decrease in reserves for other lines within middle market, including premises and operations, umbrella and products liability, principally for accident years 2015 and prior. Contributing to the increase in reserves for higher hazard general liability exposures was an increase in large losses and, in more recent accident years, an increase in claim frequency.

~~Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations~~

Contributing to the reduction in reserves for other middle market lines were more favorable outcomes due to initiatives to reduce legal expenses. In addition, reserve increases for claims with lead paint exposure were offset by reserve decreases for other mass torts and extra-contractual liability claims.

Commercial property reserves were reduced, driven by an increase in estimated reinsurance recoverables on middle market property losses from the 2017 accident year.

Automobile liability reserves were reduced, primarily driven by reduced estimates of loss adjustment expenses in small commercial for recent accident years.

Homeowners reserveswere reduced, primarily in accident years 2013 to 2017, driven by lower than expected severity across multiple perils.

~~Rollforward of Property and Casualty Insurance Product Liabilities for Unpaid Losses and LAE for the Six Months EndedJune 30, 2017~~

Commercial
Lines
Personal
Lines
Property & Casualty Other Operations Total Property & Casualty Insurance
Beginning liabilities for unpaid losses and loss adjustment expenses, gross $ 17,950
$ 2,094
$ 2,501
$ 22,545
Reinsurance and other recoverables 3,037
25
426
3,488
Beginning liabilities for unpaid losses and loss adjustment expenses, net 14,913
2,069
2,075
19,057
Provision for unpaid losses and loss adjustment expenses
Current accident year before catastrophes 1,962
1,296
—
3,258
Current accident year catastrophes 134
171
—
305
Prior accident year development 15
(14 ) 1
2
Total provision for unpaid losses and loss adjustment expenses 2,111
1,453
1
3,565
Less: payments 1,737
1,431
133
3,301
Ending liabilities for unpaid losses and loss adjustment expenses, net 15,287
2,091
1,943
19,321
Reinsurance and other recoverables 3,083
24
401
3,508
Ending liabilities for unpaid losses and loss adjustment expenses, gross $ 18,370
$ 2,115
$ 2,344
$ 22,829
Earned premiums and fee income $ 3,427
$ 1,886

Loss and loss expense paid ratio [1] 50.7
75.9

Loss and loss expense incurred ratio 61.9
78.0

Prior accident year development (pts) [2] 0.4
(0.8 )


~~[1]~~	~~The “loss and loss expense paid ratio” represents the ratio of paid losses and loss adjustment expenses to earned premiums.~~


~~[2]~~	~~“Prior accident year development (pts)” represents the ratio of prior accident year development to earned premiums.~~

~~Current Accident Year Catastrophe Losses for the Six Months Ended June 30, 2017, Net of Reinsurance~~

Commercial
Lines
Personal
Lines Total
Wind and hail $ 133
$ 168
$ 301
Winter storms 1
3
4
Total catastrophe losses $ 134
$ 171
$ 305

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

~~Unfavorable (Favorable) Prior Accident Year Development for the Three Months Ended June 30, 2017~~

Commercial Lines
Personal
Lines
Property & Casualty Other Operations Total Property & Casualty Insurance
Workers’ compensation discount accretion 8
—
—
8
Commercial property (7 ) —
—
(7 )
Catastrophes (2 ) (8 ) —
(10 )
Other reserve re-estimates, net 1
(2 ) —
(1 )
Total prior accident year development $ —
$ (10 ) $ —
$ (10 )

Unfavorable (Favorable) Prior Accident Year Development for the Six Months Ended June 30, 2017
Commercial Lines
Personal
Lines
Property & Casualty Other Operations Total Property & Casualty Insurance
Workers’ compensation $ (20 ) $ —
$ —
$ (20 )
Workers’ compensation discount accretion 16
—
—
16
General liability 10
—
—
10
Commercial property (6 ) —
—
(6 )
Bond (10 ) —
—
(10 )
Automobile liability 20
—
—
20
Catastrophes (2 ) (11 ) —
(13 )
Other reserve re-estimates, net 7
(3 ) 1
5
Total prior accident year development $ 15
$ (14 ) $ 1
$ 2

~~Bond business reservesrelated to recent accident years were reduced as reported losses for commercial and contract surety have emerged favorably.~~

~~Catastrophe reserves~~ ~~were reduced primarily due to lower estimates of 2016 wind and hail event losses and a decrease in losses on a 2015 wildfire~~.

~~P&C Other Operations Total Reserves, Net of Reinsurance~~

~~Asbestos and Environmental Reserves~~

Reserves for asbestos and environmental ("A&E") are primarily within P&C Other Operations with less significant amounts of A&E reserves included within Commercial Lines and Personal Lines. The following tables include all A&E reserves, including

~~Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations~~

~~reserves in P&C Other Operations and Commercial Lines and Personal Lines.~~

~~Asbestos and Environmental Net Reserves~~

Asbestos Environmental
June 30, 2018
Property and Casualty Other Operations $ 1,055
$ 169
Commercial Lines and Personal Lines 70
54
Ending liability — net $ 1,125
$ 223
December 31, 2017
Property and Casualty Other Operations $ 1,143
$ 182
Commercial Lines and Personal Lines 72
55
Ending liability — net $ 1,215
$ 237

~~Property & Casualty Reserves Asbestos and Environmental Summary as of June 30, 2018~~

Asbestos Environmental Total A&E
Gross
Direct $ 1,306
$ 309
$ 1,615
Assumed Reinsurance 409
45
454
Total 1,715
354
2,069
Ceded - other than National Indemnity Company ("NICO") (407 ) (29 ) (436 )
Ceded - NICO adverse development cover ("ADC ") (183 ) (102 ) (285 )
Net $ 1,125
$ 223
$ 1,348

~~Rollforward of Asbestos and Environmental Losses and LAE for the Six Months Ended June 30, 2018 and June 30, 2017~~

Asbestos Environmental
2018
Beginning liability—net $ 1,215
$ 237
Losses and loss adjustment expenses incurred —
—
Losses and loss adjustment expenses paid 90
14
Reclassification of allowance for uncollectible reinsurance —
—
Ending liability – net $ 1,125
$ 223
2017
Beginning liability—net $ 1,363
$ 292
Losses and loss adjustment expenses incurred —
—
Losses and loss adjustment expenses paid 76
33
Reclassification of allowance for uncollectible reinsurance [1] 1
—
Ending liability – net $ 1,288
$ 259

~~[1]Related to the reclassification of an allowance for uncollectible reinsurance from the "All Other" category of P&C Other Operations reserves.~~

~~The Company classifies its A&E reserves into two categories: Direct and Assumed Reinsurance.~~

~~Direct Insurance-~~ ~~includes primary and excess coverage. Of the two categories of claims, direct policies tend to have the greatest factual development from which to estimate the Company’s exposures.~~

~~Assumed Reinsurance-~~ includes both “treaty” reinsurance (covering broad categories of claims or blocks of business) and “facultative” reinsurance (covering specific risks or individual policies of primary or excess insurance companies). Assumed reinsurance exposures are less predictable than direct insurance exposures because the Company does not generally receive notice of a reinsurance claim until the underlying direct insurance claim is mature. This causes a delay in the receipt of information at the reinsurer level and adds to the uncertainty of estimating related reserves.

~~Adverse Development Cover~~

Effective December 31, 2016, the Company entered into an A&E ADC reinsurance agreement with NICO, a subsidiary of Berkshire Hathaway Inc., to reduce uncertainty about potential adverse development. Under the ADC, the Company paid a reinsurance premium of $650 for NICO to assume adverse net loss and allocated loss adjustment expense reserve development up to $1.5 billion above the Company’s existing net A&E reserves as of December 31, 2016 of approximately $1.7 billion. The $650 reinsurance premium was placed in a collateral trust account as security for NICO’s claim payment obligations to the Company. The Company has retained the risk of collection on amounts due from other third-party reinsurers and continues to be responsible for claims handling and other administrative services, subject to

~~Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations~~

~~certain conditions. The ADC covers substantially all the Company’s A&E reserve development up to the reinsurance limit.~~

Under retroactive reinsurance accounting, net adverse A&E reserve development after December 31, 2016, will result in an offsetting reinsurance recoverable up to the $1.5 billion limit. Cumulative ceded losses up to the $650 reinsurance premium paid are recognized as a dollar-for-dollar offset to direct losses incurred. Cumulative ceded losses exceeding the $650 reinsurance premium paid would result in a deferred gain. The deferred gain would be recognized over the claim settlement period in the proportion of the amount of cumulative ceded losses collected from the reinsurer to the estimated ultimate reinsurance recoveries. ~~Consequently, until periods when the deferred gain is recognized as a benefit to earnings, cumulative adverse development of A&E claims after December 31, 2016 in excess of~~ ~~$650~~ ~~may result in significant charges against earnings.~~

~~As of~~ ~~June 30, 2018, the Company has incurred a cumulative $285 in adverse development on A&E reserves that have been ceded under the ADC treaty with NICO,~~ ~~leaving approximately $1.2 billion of coverage available for future adverse net reserve development, if any.~~

~~Net and Gross Survival Ratios~~

Net and Gross survival ratios are a measure of the quotient of the carried reserves divided by average annual payments (net of reinsurance and on a gross basis) and is an indication of the number of years that carried reserves would last (i.e. survive) if future annual payments were consistent with the calculated historical average.

The survival ratios shown below are calculated for the one and three year periods ended June 30, 2018. The net basis survival ratio has been materially affected by the ADC entered into between the Company and NICO~~. The Company cedes adverse A&E development in excess of its December 31, 2016 net carried reserves of~~ ~~$1.7 billion~~ ~~to NICO up to a limit of~~ ~~$1.5 billion~~. Since December 31, 2016, net reserves for A&E have been declining as the Company has had no net incurred losses but continues to pay down net loss reserves. This has the effect of reducing the one- and three-year net survival ratios shown in the table below. For asbestos, the table also presents the three-year net survival ratios excluding the effect of the PPG Industries, Inc. ("PPG") settlement in 2016. For further discussion of the PPG settlement, see Part II, Item 7 MD&A, Critical Accounting Estimates, Annual Reserves Reviews section in the Company’s 2017 Form 10-K Annual Report.

~~Net and Gross Survival Ratios~~

Asbestos Environmental
One year net survival ratio 7.0 6.2
Three year net survival ratio- excluding PPG settlement 6.8
4.5
One year gross survival ratio 7.6
6.9
Three year gross survival ratio - excluding PPG settlement 8.0
5.9

~~Asbestos and Environmental Paid and Incurred Losses and LAE Development for the Six Months Ended June 30, 2018~~

Asbestos Environmental
Paid
Losses & LAE Incurred
Losses & LAE Paid
Losses & LAE Incurred
Losses & LAE
Gross $ 123
$ —
$ 25
$ —
Ceded- other than NICO (33 ) —
(11 ) —
Ceded - NICO ADC —
—
—
—
Net $ 90
$ —
$ 14
$ —

~~Annual Reserve Reviews~~

~~Review of Asbestos Reserves~~

~~In 2018, the Company expects to perform its regular comprehensive annual review of asbestos reserves in the fourth quarter.~~

As part of its evaluation in the fourth quarter of 2017, the Company reviewed all of its open direct domestic insurance accounts exposed to asbestos liability, as well as assumed reinsurance accounts. Based on this evaluation, the Company increased its net asbestos reserves for prior year development by $183 in the fourth quarter of 2017 which was offset by $183 of ceded losses under the ADC agreement.

~~Review of Environmental Reserves~~

~~In 2018, the Company expects to perform its regular comprehensive annual review of environmental reserves in the fourth quarter.~~

As part of its evaluation in the fourth quarter of 2017, the Company reviewed all of its open direct domestic insurance accounts exposed to environmental liability, as well as assumed reinsurance accounts for both direct and assumed reinsurance. Based on this evaluation, the Company increased its net environmental reserves for prior year development by $102 in the fourth quarter 2017 which was offset by $102 of ceded losses under the ADC agreement.

~~2017 Reserve Reviews~~

For a discussion of the Company's 2017 comprehensive annual review of A&E reserves, see Part II, Item 7 MD&A, Critical Accounting Estimates, Annual Reserves Reviews section in the Company’s 2017 Form 10-K Annual Report.

~~Uncertainties Regarding Adequacy of Asbestos and Environmental Reserves~~

A number of factors affect the variability of estimates for A&E reserves before considering the effect of the reinsurance agreement with NICO, including assumptions with respect to the frequency of claims, the average severity of those claims settled with payment, the dismissal rate of claims with no payment, resolution of coverage disputes with our policyholders and the expense to indemnity ratio. The uncertainty with respect to the underlying reserve assumptions for A&E adds a greater degree of

~~Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations~~

~~variability to these reserve estimates than reserve estimates for more traditional exposures.~~

As of June 30, 2018 , the Company reported $1.1 billion of net asbestos reserves and $223 of net environmental reserves. The Company believes that its current A&E reserves are appropriate. However, analyses of future developments could cause The Hartford to change its estimates of its A&E reserves. As discussed above, the effect of these changes could be material to the Company's liquidity and, if cumulative adverse development subsequent to December 31, 2016 exceeded $650, the effect of the changes could be material to the Company's consolidated operating results. The process of estimating A&E reserves remains subject to a wide variety of uncertainties, which are detailed in the Company's 2017 Form 10-K Annual Report.

Consistent with the Company's long-standing reserve practices, the Company will continue to review and monitor its reserves in Property & Casualty Other Operations regularly, including its annual reviews of asbestos liabilities, reinsurance recoverables and the allowance for uncollectible reinsurance, and environmental liabilities, and where future developments indicate, make appropriate adjustments to the reserves. For a discussion of the Company's reserving practices, see MD&A - Critical Accounting Estimates, Property & Casualty Insurance Product Reserves, Net of Reinsurance in the Company's 2017 Form 10-K Annual Report.

~~Valuation Allowance on Deferred Tax Assets~~

Deferred tax assets represent the tax benefit of future deductible temporary differences and certain tax carryforwards. Deferred tax assets are measured using the enacted tax rates expected to be in effect when such benefits are realized if there is no change in tax law. Under U.S. GAAP, we test the value of deferred tax assets for impairment on a quarterly basis at the entity level within each tax jurisdiction, consistent with our filed tax returns. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. The determination of the valuation allowance for our deferred tax assets requires management to make certain judgments and assumptions. In evaluating the ability to recover deferred tax assets, we have considered all available evidence as of June 30, 2018, including past operating results, forecasted earnings, future taxable income, and prudent and feasible tax planning strategies. In the event we determine it is more likely than not that we will not be able to realize all or part of our deferred tax assets in the future, an increase to the valuation allowance would be charged to earnings in the period such determination is made. Likewise, if it is later determined that it is more likely than not that those deferred tax assets would be realized, the previously provided valuation allowance would be reversed. Our judgments and assumptions are subject to change given the inherent uncertainty in predicting future performance and specific industry and investment market conditions.

As of June 30, 2018 and December 31, 2017, the Company had no valuation allowance. In assessing the need for a valuation allowance, management considered future taxable temporary difference reversals, future taxable income exclusive of reversing temporary differences and carryovers, taxable income in open

carry back years and other tax planning strategies. From time to time, tax planning strategies could include holding a portion of debt securities with market value losses until recovery, altering the level of tax exempt securities held, making investments which have specific tax characteristics, and business considerations such as asset-liability matching. Management views such tax planning strategies as prudent and feasible, and would implement them, if necessary, to realize the deferred tax assets.

~~Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations~~

SEGMENT OPERATING SUMMARIES

COMMERCIAL LINES

Results of Operations

Underwriting Summary


	Three Months Ended June 30,								Six Months Ended June 30,							Three Months Ended June 30,								Six Months Ended June 30,
	2018			2017			Change		2018			2017		Change		2019			2018			Change		2019			2018			Change
Written premiums	$	1,734		$	1,706		2	%	$	3,585		$	3,527	2	%	$	2,078		$	1,734		20	%	$	4,027		$	3,585		12	%
Change in unearned premium reserve	(11		)	(14		)	21	%	129			119		8	%	91			(11		)	NM		263			129			104	%
Earned premiums	1,745			1,720			1	%	3,456			3,408		1	%	1,987			1,745			14	%	3,764			3,456			9	%
Fee income	8			9			(11	%)	17			19		(11	%)	9			8			13	%	18			17			6	%
Losses and loss adjustment expenses
Current accident year before catastrophes	977			994			(2	%)	1,948			1,962		(1	%)	1,179			977			21	%	2,216			1,948			14	%
Current accident year catastrophes [1]	74			63			17	%	143			134		7	%	90			74			22	%	160			143			12	%
Prior accident year development [1]	(73		)	—			NM		(92		)	15		NM		22			(73		)	130	%	12			(92		)	113	%
Total losses and loss adjustment expenses	978			1,057			(7	%)	1,999			2,111		(5	%)	1,291			978			32	%	2,388			1,999			19	%
Amortization of deferred policy acquisition costs	259			252			3	%	516			501		3	%	310			259			20	%	584			516			13	%
Underwriting expenses	336			324			4	%	660			647		2	%	392			336			17	%	729			660			10	%
Amortization of other intangible assets	1			—			NM		1			—		NM		2			1			100	%	4			1			NM
Dividends to policyholders	6			3			100	%	10			7		43	%	6			6			—	%	12			10			20	%
Underwriting gain	173			93			86	%	287			161		78	%
Underwriting gain (loss)																(5		)	173			(103	%)	65			287			(77	%)
Net servicing income	1			1			—	%	1			1		—	%	2			1			100	%	1			1			—	%
Net investment income [2]	242			240			1	%	500			483		4	%	281			242			16	%	540			500			8	%
Net realized capital gains [2]	42			32			31	%	34			43		(21	%)	54			42			29	%	169			34			NM
Loss on reinsurance transaction																(91		)	—			NM		(91		)	—			NM
Other income (expenses)	(3		)	—			NM		(1		)	1		NM		(6		)	(3		)	(100	%)	(7		)	(1		)	NM
Income before income taxes	455			366			24	%	821			689		19	%	235			455			(48	%)	677			821			(18	%)
Income tax expense [3]	83			108			(23	%)	151			200		(25	%)	44			83			(47	%)	123			151			(19	%)
Net income	$	372		$	258		44	%	$	670		$	489	37	%	$	191		$	372		(49	%)	$	554		$	670		(17	%)


[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 1211 - Income Taxes of Notes to Condensed Consolidated Financial Statements.

Premium Measures ~~[1]~~

Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
New business premium $ 318
$ 277
$ 655
$ 590
Standard commercial lines policy count retention 81 % 83 % 82 % 84 %
Standard commercial lines renewal written price increase 3.1 % 3.4 % 2.8 % 3.3 %
Standard commercial lines renewal earned price increase 3.2 % 2.7 % 3.2 % 2.5 %
Standard commercial lines policies in-force as of end of period (in thousands) 1,330
1,344



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Small commercial new business premium	$	183		$	142		$	358		$	298
Middle market new business premium	177			135			317			273
Small commercial policy count retention	83		%	82		%	83		%	82		%
Middle market policy count retention [1]	81		%	77		%	81		%	78		%
Standard commercial lines renewal written price increases [1] [2]	2.2		%	3.1		%	2.0		%	3.0		%
Standard commercial lines renewal earned price increases [1] [2]	2.2		%	3.3		%	2.3		%	3.3		%
Small commercial policies in-force as of end of period (in thousands)	1,291			1,259
Middle market policies in-force as of end of period (in thousands) [1]	64			65


[1]	~~Standard commercial lines consists~~Excludes certain risk classes of ~~small commercial and middle market. Standard commercial premium measures exclude Maxum,~~ higher hazard general liability in middle market.


[2]	Small commercial and middle market ~~and livestock~~ lines ~~of business.~~within middle & large commercial are generally referred to as standard commercial lines.

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Underwriting Ratios


	Three Months Ended June 30,					Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017	Change		2018		2017	Change		2019	2018		Change	2019	2018		Change
Loss and loss adjustment expense ratio
Current accident year before catastrophes	56.0		57.8	(1.8	)	56.4		57.6	(1.2	)	59.3	56.0		3.3	58.9	56.4		2.5
Current accident year catastrophes	4.2		3.7	0.5		4.1		3.9	0.2		4.5	4.2		0.3	4.3	4.1		0.2
Prior accident year development	(4.2	)	—	(4.2	)	(2.7	)	0.4	(3.1	)	1.1	(4.2	)	5.3	0.3	(2.7	)	3.0
Total loss and loss adjustment expense ratio	56.0		61.5	(5.5	)	57.8		61.9	(4.1	)	65.0	56.0		9.0	63.4	57.8		5.6
Expense ratio	33.7		33.0	0.7		33.6		33.1	0.5		35.0	33.7		1.3	34.5	33.6		0.9
Policyholder dividend ratio	0.3		0.2	0.1		0.3		0.2	0.1		0.3	0.3		—	0.3	0.3		—
Combined ratio	90.1		94.6	(4.5	)	91.7		95.3	(3.6	)	100.3	90.1		10.2	98.3	91.7		6.6
Current accident year catastrophes and prior year development	—		3.7	(3.7	)	1.4		4.3	(2.9	)	5.6	—		5.6	4.6	1.4		3.2
Current accident year change in loss reserves upon acquisition of a business [1]											1.5	—		1.5	0.8	—		0.8
Underlying combined ratio	90.0		90.9	(0.9	)	90.2		90.9	(0.7	)	93.2	90.0		3.2	92.9	90.2		2.7


[1]	Upon acquisition of Navigators Group and a review of Navigators Insurers reserves, the three and six months ended June 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.

Net Income

Three and six months ended June 30, ~~2018~~2019 compared to the three and six months ended June 30, ~~2017~~2018

Net income~~increased~~decreased for the three and six months ended June 30, ~~2018~~2019 due to alower underwriting results, including the ADC ceded premium and reserve increases upon the acquisition of Navigators Group totaling $188 before tax, partially offset by higher ~~underwriting gain, a lower corporate Federal~~net investment income ~~tax rate~~ and ~~to a lesser extent, an increase in~~higher net realized capital gains. ~~(For~~For further discussion of investment results, see MD&A - Investment ~~Results)~~Results.

~~Net income~~increased for the six months ended June 30, 2018 due to a higher underwriting gain, a lower corporate Federal income tax rate and, to a lesser extent, an increase in net investment income, partially offset by a decrease in net realized capital gains. (For further discussion of investment results, see MD&A - Investment Results)

Underwriting Gain (Loss)

Three and six months ended June 30, ~~2018~~2019 compared to the three and six months ended June 30, ~~2017~~2018

Underwriting ~~gainincreased for~~lossin the 2019 three ~~months ended June 30,~~month period was down from an underwriting gain in the 2018 three month period and underwriting gain decreased in the six month period, primarily due to ~~favorable prior accident year development in~~$97 before tax of increases to Navigators reserves upon acquisition of the ~~second quarter of 2018, and lower~~business, a higher current accident year loss and loss adjustment ~~expenses~~expense ratio before ~~catastrophes, primarily related to lower property loss costs, partially offset by higher current accident year~~ catastrophes, and higher underwriting ~~expenses.~~

~~Underwriting gainincreased for the six months ended June 30, 2018 primarily due to~~expenses, including higher amortization of DAC, partially offset by a ~~change from unfavorable~~net reduction in Commercial Lines prior accident year ~~development~~reserves unrelated to the Navigators Group acquisition, and the effect of higher earned premium. The increase in ~~2017~~underwriting expenses included higher commissions, the effect of higher information technology and operations costs in middle market as well as higher operations and other costs in small commercial associated with the 2018 renewal rights agreement with Farmers Group to favorable development in 2018 and lower current accident year loss and loss adjustment expenses before catastrophes, primarily related to lower loss costs for property, automobile and general liability,acquire its Foremost-branded small commercial business, partially offset by ~~higher current accident year catastrophes and higher underwriting expenses.~~lower incentive compensation.

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Earned Premiums

[1]Other of ~~$12~~$11 and $11 for the three months ended June 30, ~~2017,~~2018, and ~~2018,~~2019, respectively, and ~~$24~~$23 and ~~$23~~$22 for the six months ended June 30, ~~2017,~~2018 and ~~2018,~~2019, respectively, is included in the total.

Three and six months ended June 30, ~~2018~~2019 compared to the three and six months ended June 30, ~~2017~~2018

Earned premiumsincreased for the three and six months ended June 30, ~~2018~~2019 reflecting written premium growth over the preceding twelve months.

Written premiumsincreased for the three and six months ended June 30, ~~2018 due~~2019 with growth across small commercial, middle & large commercial, and global specialty, including growth from the acquisition of Navigators Group. In standard commercial lines, renewal written price increases declined in 2019, mostly attributable to ~~growth~~larger rate decreases in small commercial workers' compensation. New business premium in small commercial and middle market increased over the prior year in both the three and ~~specialty~~six month periods.

Small commercial written premium increased for both the three and six months periods primarily driven by the business acquired under a 2018 renewal rights agreement with Farmers Group to acquire its Foremost-branded small commercial business and higher policy count retention,

partially offset by a decline in ~~small commercial for the three month period.~~

~~Small commercial written premium declined for the~~ ~~three months endedJune 30, 2018~~ primarily due to lower renewal premium, partially offset by higher new business premium. For the six month period, the increase in new business premium offset the decline in renewal premium. For both the three and six month periods, the decline in renewal premium was driven by lower audit premium and the effect of lower policy retention, partially offset byworkers' compensation renewal written ~~price increases.~~

~~Middle market written premium growth for both~~pricing compared to the ~~three and six month periods was primarily due to strong new business growth in workers compensation.~~prior year.

~~Specialty commercial written premium growth for both the three and six month periods was driven by growth in bond and financial products.~~


•	Middle & large commercial written premium growth for both the three and six month periods was primarily due to new business growth and higher renewal premium in all core lines, as well as growth in certain industry verticals, including construction and energy. The increase in renewal premium was due to higher policy count retention, renewal written price increases and higher audit premium.


•	Global specialty written premium increased for both the three and six month periods driven by the acquisition of Navigators as well as growth in financial products and property, and for the six month period only, growth in bond.

Loss and LAE Ratio before Catastrophes and Prior Accident Year Development

Three and six months ended June 30, ~~2018~~2019 compared to the three and six months ended June 30, ~~2017~~2018

Loss and LAE ratio before catastrophes and prior accident year development~~decreased~~increased for the three months ended June 30, ~~2018~~2019, primarily due to ~~lower commercial~~higher non-catastrophe property losses in ~~small commercial and~~ middle market inland marine and ~~a lower loss and loss adjustment expense ratio in general liability, partially offset by a higher loss and loss adjustment expense ratio in workers compensation.~~small commercial.

Loss and LAE ratio before catastrophes and prior accident year development~~decreased~~increased for the six months ended June 30, ~~2018~~2019 primarily due to ~~lower commercial~~higher non-catastrophe property losses, ~~in small commercial and~~including middle market inland marine, and ~~lower~~a higher loss and loss adjustment expense ~~ratios~~ratio in workers' compensation.

Included in current accident year loss and loss adjustment expenses before catastrophes for both ~~automobile~~the three and six month periods in 2019 was a $29 increase in current accident year Navigators reserves upon acquisition of the business in May 2019, which was driven primarily by increased loss estimates for general ~~liability.~~liability, international professional liability and assumed reinsurance accident and health business.

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Current Accident Year Catastrophes and Unfavorable (Favorable) Prior Accident Year Development

Three and six months ended June 30, ~~2018~~2019 compared to the three and six months ended June 30, ~~2017~~2018

Current accident year catastrophe lossestotaled $90, before tax, for the three months ended June 30, 2019 compared to $74, before tax, for the three months ended June 30, ~~2018, compared to $63, before tax,~~2018. Current accident year catastrophe losses for the three months ended June 30, ~~2017. Catastrophe~~2019 were all tornado, wind and hail events in various areas of the Midwest and South. Current accident year catastrophe losses for the three months ended June 30, 2018 were primarily due to wind and hail events in Colorado as well as wind and thunderstorm events across the Midwest, South and Mid-Atlantic.

~~Midwest, South and Mid-Atlantic. Catastrophe~~Current accident year catastrophe lossestotaled $160, before tax, for the ~~three~~six months ended June 30, ~~2017 were primarily due~~2019 compared to ~~wind and hail events in the Midwest, Texas and Colorado.~~

~~Current accident year catastrophe lossestotaled~~ $143 before tax, for the six months ended June 30, ~~2018, compared to $134, before tax,~~2018. Current accident year catastrophe losses for the six months ended June 30, ~~2017. Catastrophe~~2019 were primarily from winter storms in the northern plains, Midwest and Northeast as well as tornado, wind and hail events in various areas of the Midwest and South. Current accident year catastrophe losses for the six months ended June 30, 2018 were primarily due to multiple wind and hail events in Colorado, the Midwest, South and Mid-Atlantic as well as winter storms on the east coast. ~~Catastrophe losses~~

Prior accident year developmentwas a net unfavorable $22 for the three month period in 2019, compared with $73 of net favorable prior accident year development for the three month period in 2018 and was a net unfavorable $12 for the six months ended June 30, ~~2017 were primarily due to wind and hail events in the Midwest, Colorado, Texas and the Southeast.~~

~~Prior accident year development~~was a net favorable $73 for the three months ended June 30, 2018, compared with no net prior accident year development for the three months ended June 30, 2017, and was a net favorable $92 for the six months ended June 30, 20182019 compared to ~~unfavorable~~favorable prior accident year development of ~~$15,~~$92, before tax, for the six months ended June 30, ~~2017.~~ 2018. Net reserve increases for the three and six months ended June 30, 2019 were primarily related to a $68 before tax increase to Navigators reserves upon acquisition of the business, partially offset by lower loss reserve estimates for workers' compensation claims, catastrophes, and, for the three month period only, a decrease in package business reserves. The increase in Navigators reserves upon acquisition of the business principally related to higher reserve estimates for general liability, professional liability and marine.

Net reserve decreases for the three months ended June 30, 2018 were primarily related to decreases in reserves for workers' compensation and the 2017 hurricanes, partially offset by an increase in reserves for general liability. Estimated losses for 2017 catastrophe events in Commercial Lines decreased by $75 and $93 in the three and six months ended June 30, 2018, respectively, resulting in a decrease in reinsurance recoverables of $29 and $43 in the three and six months ended June 30, 2018, respectively, as the Company no longer expects to recover under the 2017 Property Aggregate reinsurance treaty.

~~For the three months ended June 30, 2017, a reduction of commercial property and catastrophe reserves was offset by workers’ compensation discount accretion.~~

~~Net reserve increases for the six months ended June 30, 2017 were primarily related to commercial automobile liability and general liability, largely offset by a decrease in reserves for bond.~~

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

PERSONAL LINES

Results of Operations

Underwriting Summary


	Three Months Ended June 30,								Six Months Ended June 30,								Three Months Ended June 30,								Six Months Ended June 30,
	2018			2017			Change		2018			2017			Change		2019			2018			Change		2019			2018			Change
Written premiums	$	857		$	925		(7	%)	$	1,664		$	1,814		(8	%)	$	824		$	857		(4	%)	$	1,595		$	1,664		(4	%)
Change in unearned premium reserve	1			(5		)	120	%	(51		)	(50		)	(2	%)	23			1			NM		(5		)	(51		)	90	%
Earned premiums	856			930			(8	%)	1,715			1,864			(8	%)	801			856			(6	%)	1,600			1,715			(7	%)
Fee income	10			11			(9	%)	20			22			(9	%)	10			10			—	%	19			20			(5	%)
Losses and loss adjustment expenses
Current accident year before catastrophes	557			652			(15	%)	1,123			1,296			(13	%)	517			557			(7	%)	1,017			1,123			(9	%)
Current accident year catastrophes [1]	114			92			24	%	148			171			(13	%)	48			114			(58	%)	82			148			(45	%)
Prior accident year development [1]	10			(10		)	NM		(3		)	(14		)	79	%	4			10			(60	%)	3			(3		)	NM
Total losses and loss adjustment expenses	681			734			(7	%)	1,268			1,453			(13	%)	569			681			(16	%)	1,102			1,268			(13	%)
Amortization of DAC	70			79			(11	%)	141			160			(12	%)	65			70			(7	%)	130			141			(8	%)
Underwriting expenses	156			140			11	%	299			277			8	%	155			156			(1	%)	310			299			4	%
Amortization of other intangible assets	1			1			—	%	2			2			—	%	2			1			100	%	3			2			50	%
Underwriting gain (loss)	(42		)	(13		)	NM		25			(6		)	NM		20			(42		)	148	%	74			25			196	%
Net servicing income [2]	4			4			—	%	8			7			14	%	4			4			—	%	7			8			(13	%)
Net investment income [3]	37			35			6	%	77			71			8	%	46			37			24	%	88			77			14	%
Net realized capital gains [3]	5			5			—	%	5			7			(29	%)	8			5			60	%	27			5			NM
Other income (expenses)	1			(1		)	NM		—			(2		)	100	%	(2		)	1			NM		(1		)	—			NM
Income before income taxes	5			30			(83	%)	115			77			49	%	76			5			NM		195			115			70	%
Income tax expense (benefit) [4]	(1		)	6			(117	%)	20			20			—	%	14			(1		)	NM		37			20			85	%
Net income	$	6		$	24		(75	%)	$	95		$	57		67	%	$	62		$	6		NM		$	158		$	95		66	%


[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 $42 for the three and six months endedJune 30,~~2018, respectively,~~2019 and ~~$23~~ ~~and~~ ~~$42~~ ~~for the~~ ~~three and six months endedJune 30,2017, respectively.~~2018. Includes servicing expenses of $19 for both the three months ended June 30,2019 and 2018, and $35 and $34 for the ~~three and~~ six months endedJune 30,~~2018, respectively,~~ 2019 and ~~$19~~ ~~and~~ ~~$35~~ ~~for the~~ ~~three and six months endedJune 30,2017, respectively.~~2018.


[3]	For discussion of consolidated investment results, see MD&A - Investment Results.


[4]	For discussion of income taxes, see Note 1211 - Income Taxes of Notes to Condensed Consolidated Financial Statements.

Written and Earned Premiums


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
Written Premiums	2018		2017		Change		2018		2017		Change		2019		2018		Change		2019		2018		Change
Product Line
Automobile	$	586	$	638	(8	%)	$	1,167	$	1,283	(9	%)	$	564	$	586	(4	%)	$	1,119	$	1,167	(4	%)
Homeowners	271		287		(6	%)	497		531		(6	%)	260		271		(4	%)	476		497		(4	%)
Total	$	857	$	925	(7	%)	$	1,664	$	1,814	(8	%)	$	824	$	857	(4	%)	$	1,595	$	1,664	(4	%)
Earned Premiums
Product Line
Automobile	$	596	$	652	(9	%)	$	1,196	$	1,306	(8	%)	$	557	$	596	(7	%)	$	1,112	$	1,196	(7	%)
Homeowners	260		278		(6	%)	519		558		(7	%)	244		260		(6	%)	488		519		(6	%)
Total	$	856	$	930	(8	%)	$	1,715	$	1,864	(8	%)	$	801	$	856	(6	%)	$	1,600	$	1,715	(7	%)

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Premium Measures


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
Premium Measures	2018			2017			2018			2017			2019			2018			2019			2018
Policies in-force end of period (in thousands)
Automobile							1,589			1,839									1,465			1,589
Homeowners							978			1,109									903			978
New business written premium
Automobile	$	42		$	38		$	79		$	80		$	59		$	42		$	115		$	79
Homeowners	$	11		$	12		$	20		$	24		$	20		$	11		$	36		$	20
Policy count retention
Automobile	82		%	81		%	81		%	82		%	85		%	82		%	85		%	81		%
Homeowners	84		%	83		%	83		%	82		%	85		%	84		%	85		%	83		%
Renewal written price increase
Automobile	8.2		%	10.4		%	8.9		%	10.4		%	4.9		%	8.1		%	5.2		%	8.8		%
Homeowners	10.4		%	9.1		%	10.0		%	9.0		%	7.1		%	10.4		%	7.5		%	10.0		%
Renewal earned price increase
Automobile	10.4		%	9.1		%	10.5		%	8.7		%	5.6		%	10.4		%	6.1		%	10.5		%
Homeowners	9.2		%	8.5		%	9.1		%	8.3		%	8.9		%	9.2		%	9.2		%	9.1		%

Underwriting Ratios


	Three Months Ended June 30,					Six Months Ended June 30,						Three Months Ended June 30,				Six Months Ended June 30,
Underwriting Ratios	2018	2017		Change		2018		2017		Change		2019	2018	Change		2019	2018		Change
Loss and loss adjustment expense ratio
Current accident year before catastrophes	65.1	70.1		(5.0	)	65.5		69.5		(4.0	)	64.5	65.1	(0.6	)	63.6	65.5		(1.9	)
Current accident year catastrophes	13.3	9.9		3.4		8.6		9.2		(0.6	)	6.0	13.3	(7.3	)	5.1	8.6		(3.5	)
Prior year development	1.2	(1.1	)	2.3		(0.2	)	(0.8	)	0.6		0.5	1.2	(0.7	)	0.2	(0.2	)	0.4
Total loss and loss adjustment expense ratio	79.6	78.9		0.7		73.9		78.0		(4.1	)	71.0	79.6	(8.6	)	68.9	73.9		(5.0	)
Expense ratio	25.4	22.5		2.9		24.6		22.4		2.2		26.5	25.4	1.1		26.5	24.6		1.9
Combined ratio	104.9	101.4		3.5		98.5		100.3		(1.8	)	97.5	104.9	(7.4	)	95.4	98.5		(3.1	)
Current accident year catastrophes and prior year development	14.5	8.8		5.7		8.4		8.4		—		6.5	14.5	(8.0	)	5.3	8.4		(3.1	)
Underlying combined ratio	90.4	92.6		(2.2	)	90.1		91.9		(1.8	)	91.0	90.4	0.6		90.1	90.1		—

Product Combined Ratios


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2018	2017	Change		2018	2017	Change		2019	2018	Change		2019	2018	Change
Automobile
Combined ratio	99.7	100.8	(1.1	)	96.4	99.1	(2.7	)	97.2	99.7	(2.5	)	95.2	96.4	(1.2	)
Underlying combined ratio	96.5	99.1	(2.6	)	95.4	97.8	(2.4	)	96.7	96.5	0.2		95.2	95.4	(0.2	)
Homeowners
Combined ratio	117.8	103.4	14.4		103.8	103.4	0.4		99.3	117.8	(18.5	)	96.2	103.8	(7.6	)
Underlying combined ratio	76.4	77.6	(1.2	)	77.7	78.2	(0.5	)	79.2	76.4	2.8		78.8	77.7	1.1

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Net Income

Three and six months ended June 30, ~~2018~~2019 compared to the three and six months ended June 30, ~~2017~~2018

Net income~~in 2018 decreased~~increased for the three month period primarily due to a ~~larger~~higher underwriting ~~loss, partially offset by a lower Federal income tax rate~~gain and ~~to a lesser extent,~~ higher net investment income. Net income for the six month period increased, primarily due to a higher underwriting gain, ~~a lower Federal income tax rate~~an increase in net realized capital gains and higher net investment income.

Underwriting Gain (Loss)

Three and six months ended June 30, ~~2018~~2019 compared to the three and six months ended June 30, ~~2017~~2018

Underwriting ~~loss~~gainincreased for the three month period in ~~three months ended June 30, 2018~~2019 primarily due to ~~highe~~rlower current accident year ~~catastrophe losses, a change to~~catastrophes, less unfavorable prior accident year reserve development, ~~related to~~and a lower current accident year loss ratio before catastrophes in auto, partially offset by a higher ~~expenses~~underwriting expense ratio and the effect of lower earned premium. ~~These effects were partially offset by~~Underwriting gain increased for the six month period in 2019 primarily due to lower current accident year catastrophes and lower current accident year loss ~~and loss adjustment expense~~ ratios before catastrophes in both ~~automobile~~auto and ~~homeowners. The~~homeowners partially offset by the effect of lower earned premium and an increase in underwriting expenses. For

the three and six month periods, the increase in underwriting expenses was largely driven by investments in information technology, and an increase in direct marketing spending, selling expenses, and operational costs to generate new ~~business. For the six month period, underwriting gain (loss) improved,~~

~~primarily due to a lower current accident year loss and loss adjustment expense ratio before catastrophes for both automobile and homeowners and lower current accident year catastrophes,~~business, partially offset by ~~less favorable prior accident year development, higher expenses,~~a reduction in state taxes and assessments and lower incentive compensation. The decrease in amortization of DAC for both the ~~effect of a decline~~three and six month periods was commensurate with the reduction in earned premium.

Earned Premiums

Three and six months ended June 30, ~~2018~~2019 compared to the three and six months ended June 30, ~~2017~~2018

Earned premiums decreased in ~~2018,~~2019, reflecting a decline in written premium over the prior six to twelve months in both ~~agency~~Agency channels and, to a lesser extent, in AARP Direct.

Written premiums decreased in ~~2018~~2019 in AARP Direct and both Agency channels. Despite an increase in new business and higher policy count retention in both ~~agency channels~~auto and ~~in AARP Direct~~homeowners, written premium declined, primarily due to not generating enough new business to offset the loss of non-renewed premium.

Renewal written pricing increases in ~~2018~~2019 were ~~higher~~lower in both auto and homeowners ~~and have moderated~~ in ~~automobile with high single-digit price increases~~response to moderating loss cost trends.

Policy count retention increased in both automobile and ~~low double-digit price increases~~homeowners, in ~~homeowners~~part driven by ~~actions taken to improve profitability.~~

~~Policy count retention~~ ~~increased in 2018~~ ~~in automobile in the three month period as~~moderating renewal written ~~pricing increases moderated. Policy count retention in homeowners increased~~ ~~for both the three and six month periods~~ ~~in 2018 despite higher renewal~~ ~~written~~ price increases.

Policies in-forcedecreased in ~~2018~~2019 in both automobile and homeowners, driven by ~~low~~not generating enough new business ~~and low policy count retention.~~to offset the loss of non-renewed policies.

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Loss and LAE Ratio before Catastrophes and Prior Accident Year Development

Three and six months ended June 30, ~~2018~~2019 compared to the three and six months ended June 30, ~~2017~~2018

Loss and LAE ratio before catastrophes and prior accident year development decreased in both the three and six month periods, ~~in 2018,~~primarily due to the effect of earned pricing increases in both ~~the~~ automobile and homeowners ~~lines~~ ~~and~~ ~~lower~~partially offset by higher non-catastrophe ~~weather-related~~ homeowners loss ~~costs.~~costs in the three month period. For auto in both the three and six month periods, a modest increase in average claim severity driven by physical damage was mostly offset by a slight decrease in average claim frequency.

Current Accident Year Catastrophes and Unfavorable (Favorable) Prior Accident Year Development

Three and six months ended June 30, ~~2018~~2019 compared to the three and six months ended June 30, ~~2017~~2018

Current accident year catastrophe lossesfor three months ended June 30, 2019 were primarily from tornado , wind and hail events in the South and Midwest. Catastrophe losses for three months ended June 30, 2018 were from catastrophe events across the country including multiple wind and hail events in Colorado as well as wind and thunderstorm events in the ~~Northeast,~~Northeast. Midwest and South. Catastrophe losses for ~~three~~the six months ended June 30, ~~2017 were primarily due~~2019 included winter storms across the country and, to ~~multiple~~a lesser extent, tornado, wind and hail events ~~across various U.S. geographic regions, concentrated~~ in ~~Colorado, Texas,~~the South and ~~the~~ Midwest. Catastrophe losses for the six months ended June 30, 2018 included multiple wind and hail events across the Great Plains, Midwest, South, and Northeast as well as from east coast winter storms. ~~Catastrophe losses for~~

Prior accident year developmentwas unfavorable in both the three and six months ended June 30, ~~2017 were~~2019 primarily due to ~~multiple wind and hail events across various geographic regions, concentrated~~net increases in ~~Texas, Colorado,~~reserves for prior accident year catastrophes, partially offset by a decrease in auto liability reserves in the ~~Midwest and the Southeast.~~

six month period. Prior accident year development was unfavorable inin the three months ended June 30, 2018 primarily due to net increases in reserves for prior accident year catastrophes. Prior accident year development for the six months ended June 30, 2018 included decreases in reserves for homeowners ~~partially~~largely offset by increases in reserves for prior

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

accident year catastrophes. Estimated losses for 2017 catastrophe events in Personal Lines decreased by $27 and $30 in the three and six

~~Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations~~

months ended June 30, 2018, respectively, resulting in a decrease in reinsurance recoverables of $40 and $47 in the three and six months ended June 30, 2018, respectively, as the Company no longer expects to recover under the 2017 Property Aggregate reinsurance treaty.

~~reinsurance treaty. Prior accident year development for the three and six month periods in 2017 primarily included a decrease in reserves for catastrophes.~~

PROPERTY & CASUALTY OTHER OPERATIONS

Results of Operations

Underwriting Summary


	Three Months Ended June 30,								Six months ended June 30,								Three Months Ended June 30,								Six months ended June 30,
	2018			2017			Change		2018			2017			Change		2019			2018			Change		2019			2018			Change
Losses and loss adjustment expenses																									��
Prior accident year development [1]	16			—			NM		$	16		$	1		NM
Prior accident year development																	$	9		$	16		(44	%)	$	9		$	16		(44	%)
Total losses and loss adjustment expenses	16			—			NM		16			1			NM		9			16			(44	%)	9			16			(44	%)
Underwriting expenses	3			3			—	%	6			8			(25	%)	3			3			—	%	6			6			—	%
Underwriting loss	(19		)	(3		)	NM		(22		)	(9		)	(144	%)	(12		)	(19		)	37	%	(15		)	(22		)	32	%
Net investment income [2]	22			27			(19	%)	46			58			(21	%)	21			22			(5	%)	43			46			(7	%)
Net realized capital gains [2]	3			5			(40	%)	2			9			(78	%)	4			3			33	%	13			2			NM
Other income	—			—			—	%	—			2			(100	%)
Income before income taxes	6			29			(79	%)	26			60			(57	%)	13			6			117	%	41			26			58	%
Income tax expense [3]	1			9			(89	%)	4			16			(75	%)	2			1			100	%	7			4			75	%
Net income	$	5		$	20		(75	%)	$	22		$	44		(50	%)	$	11		$	5		120	%	$	34		$	22		55	%

[1]

For discussion of prior accident year development, see MD&A ~~- Critical Accounting Estimates, Property & 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 12~~ - 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.

Net Income

Three and six months ended June 30, ~~2018~~2019 compared to the three and six months ended June 30, ~~2017~~2018

Net Income ~~for the~~ increased three and six months ended June 30, ~~2018 decreased, as compared to prior year periods,~~2019 primarily due to a decrease in net unfavorable prior accident year development and, for the sixth month period, an increase in net realized capital gains.

Underwriting lossdecreased for three and six months ended June 30, 2019 primarily due to a decrease in unfavorable prior accident year development. Net unfavorable prior accident year reserve development in 2019 included reserve increases for product liability and construction defects claims. Net unfavorable prior accident year reserve development in 2018 included reserve increases for certain mass torts and the allowance for uncollectible ~~reinsurance as well as lower net investment income.~~reinsurance.

~~Underwriting lossdecreased for the three~~Asbestos and ~~six months ended June 30, 2018 primarily due to an increase in unfavorable prior accident year development.~~

~~A&E~~ environmental reservecomprehensive annual ~~reserve~~ reviews will occur in the fourth quarter of ~~2018.~~2019. For information on A&E reserves, see MD&A - Critical Accounting Estimates, Asbestos and Environmental ~~Reserves.~~Reserves included in the Company's 2018 Form 10-K Annual Report.

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

GROUP BENEFITS

Results of Operations

																											Operating Summary
	Three Months Ended June 30,						Six months ended June 30,							Three Months Ended June 30,						Six months ended June 30,
	2018		2017		Change		2018			2017		Change		2019		2018		Change		2019		2018			Change
Premiums and other considerations	$	1,401	$	824	70	%	$	2,802		$	1,659	69	%	$	1,422	$	1,401	1	%	$	2,831	$	2,802		1	%
Net investment income [1]	115		88		31	%	236			183		29	%	121		115		5	%	242		236			3	%
Net realized capital gains (losses) [1]	2		13		(85	%)	(23		)	21		NM		7		2		NM		12		(23		)	152	%
Total revenues	1,518		925		64	%	3,015			1,863		62	%	1,550		1,518		2	%	3,085		3,015			2	%
Benefits, losses and loss adjustment expenses	1,059		628		69	%	2,144			1,279		68	%	1,062		1,059		—	%	2,115		2,144			(1	%)
Amortization of DAC	11		8		38	%	21			16		31	%	14		11		27	%	27		21			29	%
Insurance operating costs and other expenses	317		193		64	%	638			413		54	%	324		317		2	%	639		638			—	%
Amortization of other intangible assets	16		—		NM		33			—		NM		11		16		(31	%)	21		33			(36	%)
Total benefits, losses and expenses	1,403		829		69	%	2,836			1,708		66	%	1,411		1,403		1	%	2,802		2,836			(1	%)
Income before income taxes	115		96		20	%	179			155		15	%	139		115		21	%	283		179			58	%
Income tax expense [2]	19		27		(30	%)	29			41		(29	%)	26		19		37	%	52		29			79	%
Net income	$	96	$	69	39	%	$	150		$	114	32	%	$	113	$	96	18	%	$	231	$	150		54	%


[1]	For discussion of consolidated investment results, see MD&A - Investment Results.


[2]	For discussion of income taxes, see Note 1211 - Income Taxes of Notes to the Condensed Consolidated Financial Statements.

																									Premiums and Other Considerations
	Three Months Ended June 30,						Six months ended June 30,						Three Months Ended June 30,						Six months ended June 30,
	2018		2017		Change		2018		2017		Change		2019		2018		Change		2019		2018		Change
Fully insured – ongoing premiums	$	1,352	$	802	69	%	$	2,709	$	1,607	69	%	$	1,373	$	1,352	2	%	$	2,735	$	2,709	1	%
Buyout premiums	5		3		67	%	5		14		(64	%)	4		5		(20	%)	6		5		20	%
Fee income	44		19		132	%	88		38		132	%	45		44		2	%	90		88		2	%
Total premiums and other considerations	$	1,401	$	824	70	%	$	2,802	$	1,659	69	%	$	1,422	$	1,401	1	%	$	2,831	$	2,802	1	%
Fully insured ongoing sales, excluding buyouts	$	85	$	67	27	%	$	539	$	278	94	%	$	99	$	85	16	%	$	506	$	539	(6	%)

																					Ratios, Excluding Buyouts
	Three Months Ended June 30,					Six months ended June 30,					Three Months Ended June 30,					Six months ended June 30,
	2018		2017		Change	2018		2017		Change	2019		2018		Change	2019		2018		Change
Group disability loss ratio	74.3	%	78.9	%	(4.6)	74.6	%	80.9	%	(6.3)	72.9	%	74.3	%	(1.4)	71.3	%	74.6	%	(3.3)
Group life loss ratio	77.4	%	74.2	%	3.2	79.2	%	73.6	%	5.6	77.8	%	77.4	%	0.4	79.6	%	79.2	%	0.4
Total loss ratio	75.5	%	76.1	%	(0.6)	76.5	%	76.9	%	(0.4)	74.6	%	75.5	%	(0.9)	74.7	%	76.5	%	(1.8)
Expense ratio [1]	23.9	%	24.5	%	(0.6)	23.9	%	26.1	%	(2.2)	23.9	%	23.9	%	0.0	23.6	%	23.9	%	(0.3)

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

																									Margin
	Three Months Ended June 30,						Six months ended June 30,						Three Months Ended June 30,						Six months ended June 30,
	2018		2017		Change		2018		2017		Change		2019		2018		Change		2019		2018		Change
Net income margin	6.3	%	7.5	%	(1.2	)	5.0	%	6.2	%	(1.2	)	7.3	%	6.3	%	1.0		7.5	%	5.0	%	2.5
Less: Net realized capital gains (losses) excluded from core earnings, after tax	(0.1	%)	0.8	%	(0.9	)	(0.7	%)	0.7	%	(1.4	)
Less: Integration and transaction costs associated with acquired business, after tax	(0.5	%)	—	%	(0.5	)	(0.5	%)	—	%	(0.5	)
Adjustments to reconcile net income margin to core earnings margin:
Net realized capital losses (gains) excluded from core earnings, before tax													(0.4	%)	—	%	(0.4	)	(0.4	%)	0.8	%	(1.2	)
Integration and transaction costs associated with acquired business, before tax													0.7	%	0.8	%	(0.1	)	0.7	%	0.7	%	—
Income tax benefit													(0.1	%)	(0.2	%)	0.1		(0.1	%)	(0.3	%)	0.2
Core earnings margin	6.9	%	6.7	%	0.2		6.2	%	5.5	%	0.7		7.5	%	6.9	%	0.6		7.7	%	6.2	%	1.5

Net Income

Three and six months endedJune 30, ~~2018~~2019 compared to the three and six months endedJune 30, ~~2017~~2018

Net incomeincreased for the three month period, primarily due to an increase in premiums and other considerations, higher net realized gains and higher net investment income. Despite the increase in revenues, benefits and losses were relatively flat as the effect of a lower group disability loss ratio offset the effect on benefits and losses of higher earned premium.

Net income ~~higher premium~~for the six month period increased largely due to a change from net realized capital losses for the 2018 period to net capital gains for the 2019 period and, to a lesser extent, an increase in premiums and other considerations and a lower loss ratio, partially offset by lower net realized capital gains, amortization of intangible assets, and higher insurance operating costs and other expenses, including integration costs related to the acquisition of Aetna's U.S. group life and disability business in November 2017. For the six months ended June 30, 2018 net income increased due to higher net investment ~~income, higher premium~~income. Despite the increase in revenues, benefits and ~~other considerations and~~losses were relatively flat as the effect of a lower group disability loss ratio ~~partially~~ offset ~~by a change to net realized capital~~the effect on benefits and losses ~~amortization~~ of ~~intangible assets, and~~ higher ~~insurance operating costs and other expenses, including integration costs related to the acquisition of Aetna's U.S. group life and disability business in November 2017.~~earned premium.

Insurance operating costs and other expenses for the three month and six month period increased ~~64% primarily~~ due to ~~the acquisition of Aetna's U.S. group life~~commission on our voluntary product offerings and disability business and integration expenses. For the six months ended June 30, 2018, operating costs and other expenses increased 54% primarily due to the acquisition of Aetna's U.S. group life and disability business and integration expenses,investments in technology, partially offset by achievements of expense synergies, lower incentive compensation, and lower state ~~guaranty fund~~taxes and assessments ~~incurred~~ in the ~~first quarter 2017 related to the liquidation of a life and health insurance company.~~six month period.

Fully Insured Ongoing Premiums

[1] Other of ~~$51~~$59 and ~~$59~~$61 is included in the three months ended June 30, ~~2017,~~2018, and ~~2018,~~2019, respectively, and ~~$106~~$119 and ~~$119~~$123 for the six months endedJune 30, ~~2017,~~2018, and ~~2018,~~2019, respectively is included in the total.

Three and six months endedJune 30, ~~2018~~2019 compared to the three and six months endedJune 30, ~~2017~~2018

Fully insured ongoing premiums increased ~~69%~~modestly for the three and six ~~months ended June 30, 2018 driven primarily by the acquisition of Aetna's U.S.~~month period reflecting an increase in group ~~life~~disability, and, ~~disability business, sales in excess of cancellations, strong group life and disability persistency and~~to a lesser extent higher premium from ~~the New York Paid Family Leave product.~~Voluntary products, partially offset by a decrease in group life.

Fully insured ongoing sales, excluding buyouts for the three ~~and~~month period increased 16% driven primarily by an increase in group life sales. For the six months ended June 30, ~~2018 increased 27% and 94%~~2019 , ~~respectively, primarily due to new business generated by our larger combined~~ sales ~~force following~~decreased 6% as the ~~acquisition of Aetna's U.S. group life and disability business. Excluding~~prior year included first year sales from the ~~impact of the acquisition, the Company saw an increase in the sale of voluntary products and fully insured sales in disability in 2018 due, in part, to the addition of a~~ new New York Paid Family Leave product.

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Ratios

Three and six months ended June 30, ~~2018~~2019 compared to the three and six months ended June 30, ~~2017~~2018

Total loss ratiodecreased ~~0.6~~0.9 points for the three month

period and 1.8 points for the six month period reflecting a lower disability loss ratio partially offset by a slightly higher group life loss ratio. The group disability loss ratio decreased 1.4 points and ~~0.4~~3.3 points ~~respectively~~ for the three and six month period, ~~ending June 30, 2018 reflecting a lower group disability loss ratio, partially offset by a higher group life loss ratio.~~ respectively, primarily due to continued favorable incidence trends on current incurral year reserves and, for the six month period, on prior incurral year reserves.

The group life loss ratio increased ~~3.2~~0.4 points in both the three and six month periods due to lower favorable prior incurral year development on death and group life premium waiver claims, partially offset by lower mortality on the current accident year.

Expense ratio was flat for the three month period and ~~5.6~~decreased 0.3 points for the six month ~~period driven by~~period. Lower amortization of other intangible assets, lower incentive compensation, the benefit of higher ~~loss ratios associated with the business from the Aetna acquisition~~earned premiums and ~~higher mortality, primarily~~a reduction in ~~the first quarter of 2018. Partially offsetting the higher mortality was lower than expected claim incidence related to prior incurral years on group life~~state taxes and ~~accidental death and dismemberment claims. The group disability loss ratio decreased 4.6 points for the three month period and 6.3 points for~~assessments in the six month period, primarily due to declining incidence and continued strong recoveries driving favorable development on prior incurral year reserves, as well as modest price increases. In addition, the group disability loss ratio improved as a result of a lower discount accretion on reserves acquired with Aetna's group disability business.

~~Expense ratio~~ decreased 0.6 points for the three months ended June 30, 2018. The decline is driven by a greater mix of lower commission national accounts business due to the acquisition of Aetna's U.S. group life and disability business and higher revenues to cover fixed costs, partiallywere largely offset by ~~intangible asset~~higher amortization ~~incurred~~of DAC in 2018. For the six months ended June 30, 2018, the expense ratio decreased 2.2 points. Of the decline, 1.2 points is driven by state guaranty fund assessments in 2017 related to the liquidation of a life and health insurance company. The remaining 1.0 point decline is driven by a greater mix of lower commission national accounts business due to the acquisition of Aetna's U.S. group life and disability business and higher revenues to cover fixed costs, partially offset by intangible asset amortization incurred in 2018.both periods.

HARTFORD FUNDS

Results of Operations

Operating Summary



	Three Months Ended June 30,							Six Months Ended June 30,
	2019		2018			Change		2019			2018			Change
Fee income and other revenue	$	251	$	261		(4	%)	$	489		$	519		(6	%)
Net investment income	2		1			100	%	4			2			100	%
Net realized capital gains	—		(1		)	100	%	2			(1		)	NM
Total revenues	253		261			(3	%)	495			520			(5	%)
Amortization of DAC	3		4			(25	%)	6			8			(25	%)
Operating costs and other expenses	203		211			(4	%)	405			423			(4	%)
Total benefits, losses and expenses	206		215			(4	%)	411			431			(5	%)
Income before income taxes	47		46			2	%	84			89			(6	%)
Income tax expense	9		9			—	%	16			18			(11	%)
Net income	$	38	$	37		3	%	$	68		$	71		(4	%)
Daily average Hartford Funds AUM	$	117,875	$	117,070		1	%	$	115,058		$	117,184		(2	%)
ROA [1]	12.9		12.6			2	%	11.9			12.2			(2	%)
Adjustment to reconcile ROA to ROA, core earnings:
Effect of net realized capital losses (gains) excluded from core earnings, before tax	—		0.2			(100	%)	(0.4		)	0.2			NM
ROA, core earnings [1]	12.9		12.8			1	%	11.5			12.4			(7	%)

[1] Represents annualized earnings divided by a daily average of assets under management, as measured in basis points.

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

~~MUTUAL FUNDS~~

~~Results of Operations~~

~~Operating Summary~~

Three Months Ended June 30, Six Months Ended June 30,

2018 2017 Change 2018 2017 Change
Fee income and other revenue $ 261
$ 247
6 % $ 519
$ 484
7 %
Net investment income 1
—
NM
2
1
100 %
Net realized capital losses (1 ) —
NM
(1 ) —
NM
Total revenues 261
247
6 % 520
485
7 %
Amortization of DAC 4
5
(20 %) 8
11
(27 %)
Operating costs and other expenses [1] 211
204
3 % 423
401
5 %
Total benefits, losses and expenses 215
209
3 % 431
412
5 %
Income before income taxes 46
38
21 % 89
73
22 %
Income tax expense 9
14
(36 %) 18
26
(31 %)
Net income $ 37
$ 24
54 % $ 71
$ 47
51 %

Daily average total Mutual Funds segment AUM $ 117,070
$ 105,625
11 % $ 117,184
$ 103,382
13 %
Return on Assets ("ROA") [2]
Net income 12.6
9.2
37 % 12.2
9.2
33 %
Core Earnings 12.8
9.2
39 % 12.4
9.2
35 %


~~[1]~~	~~Includes distribution costs of~~ ~~$46~~ ~~and~~ ~~$92~~ ~~for the three and~~ ~~six months ended June 30,2017, respectively, that were previously netted against fee income and are now presented gross in insurance operating costs and other expenses.~~


~~[2]~~	~~Represents annualized earnings divided by a daily average of assets under management, as measured in basis points.~~

~~Mutual~~Hartford Funds Segment AUM



	Three Months Ended June 30,								Six Months Ended June 30,
	2019			2018			Change		2019			2018			Change
Mutual Fund and ETP AUM - beginning of period	$	103,225		$	99,883		3	%	$	91,557		$	99,090		(8	%)
Sales - mutual fund	5,707			5,252			9	%	12,019			11,429			5	%
Redemptions - mutual fund	(6,097		)	(5,007		)	(22	%)	(11,997		)	(10,700		)	(12	%)
Net flows - ETP	285			228			25	%	747			422			77	%
Net flows - mutual fund and ETP	(105		)	473			(122	%)	769			1,151			(33	%)
Change in market value and other	3,769			1,309			188	%	14,563			1,424			NM
Mutual fund and ETP AUM - end of period	106,889			101,665			5	%	106,889			101,665			5	%
Talcott Resolution life and annuity separate account AUM [1]	14,412			15,376			(6	%)	14,412			15,376			(6	%)
Hartford Funds AUM	$	121,301		$	117,041		4	%	$	121,301		$	117,041		4	%

Three Months Ended June 30, Six Months Ended June 30,
2018 2017 [1] Change 2018 2017 Change
Mutual Fund and ETP AUM - beginning of period $ 99,883
$ 87,076
15 % $ 99,090
$ 81,507
22 %
Sales - mutual fund 5,252
6,248
(16 %) 11,429
13,466
(15 %)
Redemptions - mutual fund (5,007 ) (4,934 ) (1 %) (10,700 ) (10,819 ) 1 %
Net flows - ETP 228
33
NM
422
55
NM
Net flows - mutual fund and ETP 473
1,347
(65 %) 1,151
2,702
(57 %)
Change in market value and other 1,309
3,158
(59 %) 1,424
7,372
(81 %)
Mutual fund and ETP AUM - end of period 101,665
91,581
11 % 101,665
91,581
11 %
Talcott Resolution life and annuity separate account AUM [2] 15,376
16,098
(4 %) 15,376
16,098
(4 %)
Total Mutual Funds segment AUM $ 117,041
$ 107,679
9 % $ 117,041
$ 107,679
9 %

[1]~~ETP AUM has been combined with mutual fund AUM. Previously ETPs were shown separately.~~

~~[2]~~Represents AUM of the ~~Talcott Resolution~~ life and annuity business sold in May 2018 that is still managed by the Company's ~~Mutual~~Hartford Funds segment.

Mutual Fund and ETP AUM by Asset Class


							June 30,
	June 30, 2018		June 30, 2017		Change		2019		2018		Change
Equity	$	66,285	$	58,047	14	%	$	68,474	$	66,285	3	%
Fixed Income	14,556		14,286		2	%	15,569		14,556		7	%
Multi-Strategy Investments [1]	19,894		18,923		5	%	20,095		19,894		1	%
Exchange-traded Products	930		325		186	%	2,751		930		196	%
Mutual Fund and ETP AUM	$	101,665	$	91,581	11	%	$	106,889	$	101,665	5	%

[1]Includes balanced, allocation, and alternative investment products.

Net Income

Three and six months ended June 30, 2019 compared to the three and six months ended June 30, 2018

Net incomeincreased slightly for the three month period compared to the prior year due to lower general, administrative and other expenses. Net income decreased modestly for the six month period compared to the prior year due to lower investment management fee revenue as a result of lower daily average AUM, largely offset by lower distribution and service expenses. Also, contributing to the change in each period was an increase in contingent consideration payable associated with the acquisition

96of Lattice. See note 5 - Fair Value Measurements for additional information.

Hartford Funds AUM

June 30, 2019 compared to June 30, 2018

Hartford Funds AUM increased compared to the prior year due to market appreciation, partially offset by net outflows from mutual funds and ETP's and the continued runoff of AUM related to the Talcott Resolution life and annuity separate account AUM. Net flows from mutual funds and ETP's were a positive $769 in the first six months of 2019 compared to net positive flows of $1.2 billion in the first six months of 2018.

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

~~Net Income~~

~~Three and six months ended June 30, 2018 compared to the three and six months ended June 30, 2017~~

~~Net income~~for both the three and six month periods increased compared to the prior year due to higher investment management fees and other revenue, partially offset by higher variable costs, including sub-advisory and distribution and services expenses. Also contributing to the increase was the effect of a lower corporate Federal income tax rate.

~~Total Mutual Funds Segment AUM~~

~~Three and six months endedJune 30, 2018compared to thethree and six months endedJune 30, 2017~~

~~Total Mutual Funds segment AUM~~ increased in 2018 primarily resulting from positive net flows and market appreciation. The increase in Mutual Fund business AUM was partially offset by the continued runoff of AUM still managed by the Company that is related to the Talcott Resolution life and annuity business sold in May, 2018.

~~Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations~~

Net Income (Loss)

Three and six months ended June 30, ~~2018~~2019 compared to the three and six months ended June 30, ~~2017~~2018

Net income for both the three and sixth month periods increased from a net loss in the prior year periods primarily due to a pension settlement charge of $488, after-tax in 2017. The settlement charge related to the purchase of a group annuity contract to transfer $1.6 billion of certain U.S. qualified pension plan liabilities to a third-party. Additionally, there was an increase in income from discontinued operations for both the three and six month periods ~~partially offset by a lower tax benefit that was principally~~decreased due to ~~the reduction in the corporate Federal income tax rate and the effect of non-deductible executive compensation. The increase~~a decrease in income from discontinued operations ~~was~~as a result of the sale of the life and annuity business in May 2018. The loss from continuing operations, net of tax, decreased primarily due to ~~a reduction~~other revenues from earnings on the Company's retained equity interest in ~~loss on sale in 2018. For~~ the ~~three months ended June 30, 2018, the reduction in loss on sale was largely attributable to~~former life and annuity operations of $3 and $31, higher net investment income driven by an increase in the estimated retained net operating loss carryover tax benefits from Talcott Resolution. For the six months ended June 30, 2018, the reduction in loss on sale of Talcott Resolution was primarily due to the increase in retained tax benefitsshort term interest rates as well as the ~~reclassification to retained earnings~~reinvestment of ~~$193~~the proceeds from the sale of ~~tax effects stranded~~the life and annuity business until the Navigators Group acquisition in ~~AOCI due to the accounting for Tax Reform. For more information on the reclassification of stranded tax effects, see Note 1 - Basis of Presentation~~May, 2019, as well as lower interest expense and an increase in net realized capital gains.

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

~~Significant Accounting Policies of Notes to the Condensed Consolidated Financial Statements.~~

Interest Expense

Three and six months ended June 30, ~~2018~~2019 compared to the three and six months ended June 30, ~~2017~~2018

Interest expense for both the three and ~~sixth~~six month periods ~~remained unchanged from 2017~~decreased, primarily due to ~~2018.~~the maturity of senior notes payable and redemption of junior subordinated debentures. On January 15, 2019, the Company repaid at maturity the $413 principal amount of its 6.0% senior notes. On June 15, 2018, The Hartford redeemed $500 aggregate principal amount of its 8.125% Fixed-to-Floating Rate Junior Subordinated Debentures due 2068. On March 15, 2018, the Company issued $500 of 4.4% senior notes due March 15, 2048 for net proceeds of approximately $490. The Company used a portion of the net proceeds to repay the Company's $320 of 6.3% notes at maturity. On June 15, 2018, The Hartford completed its previously announced redemption of $500 aggregate principal amount of its 8.125% Fixed-to-Floating Rate Junior Subordinated Debentures due 2068 and recognized a $6 loss on extinguishment of debt for unamortized deferred debt issuance costs.See Note 11 -Debt of Notes to the Condensed Consolidated Financial Statements.

ENTERPRISE RISK MANAGEMENT

The Company’s Board of Directors has ultimate responsibility for risk oversight, as described more fully in our Proxy Statement, while management is tasked with the day-to-day management of the Company’s risks.

The Company manages and monitors risk through risk policies, controls and limits. At the senior management level, an Enterprise Risk and Capital Committee (“ERCC”) oversees the risk profile and risk management practices of the Company.

The Company's enterprise risk management ("ERM") function supports the ERCC and functional committees, and is tasked with, among other things:

risk identification and assessment;

the development of risk appetites, tolerances, and limits;

risk monitoring; and

internal and external risk reporting.

The Company categorizes its main risks as insurance risk, operational risk and financial risk. Insurance risk and financial risk are described in more detail below. Operational risk and specific risk tolerances for natural catastrophes ~~terrorism risk~~ and pandemic risk are described in the ERM section of the MD&A in The Hartford’s ~~2017~~2018 Form 10-K Annual Report.

Insurance Risk

The Company categorizes its insurance risks across ~~property-~~

~~casualty,~~property-casualty and group benefits ~~and life~~ products. Non-catastrophe insurance risk arises from a number of exposures including property, liability, mortality, morbidity, disability and longevity.

Catastrophe risk primarily arises in the property, automobile, workers' compensation, casualty, group life, and group disability ~~and workers' compensation product lines.~~lines of business. The Company establishes risk limits to control potential loss and actively monitors the risk exposures as a percent of statutory surplus. The Company also uses reinsurance to transfer insurance risk to well-established and financially secure reinsurers.

Reinsurance as a Risk Management Strategy

The Company uses reinsurance to transfer certain risks to reinsurance companies based on specific geographic or risk concentrations. A variety of traditional reinsurance products are used as part of the Company's risk management strategy, including excess of loss occurrence-based products that reinsure property and workers' compensation exposures, and individual risk (including facultative reinsurance) or quota share arrangements, that reinsure losses from specific classes or lines of business. The Company has no significant finite risk contracts in place and the statutory surplus benefit from all such prior year contracts is immaterial. ~~Facultative reinsurance is used by the Company to manage policy-specific risk exposures based on established underwriting guidelines.~~ The Hartford also participates in governmentally administered reinsurance facilities such as the Florida Hurricane Catastrophe Fund (“FHCF”), the Terrorism Risk Insurance Program (“TRIPRA”) and other reinsurance programs relating to particular risks or specific lines of business.

Reinsurance for Catastrophes- The Company ~~has several catastrophe~~utilizes various reinsurance programs to mitigate catastrophe losses including ~~reinsurance~~excess of loss occurrence-based treaties ~~that cover~~covering property and ~~workers'~~workers’ compensation, aggregate property catastrophe treaty providing protection for the aggregate of all catastrophe events designated by Property Claims Services and individual risk (including facultative reinsurance) that reinsure losses ~~aggregating~~ from ~~single~~specific classes or lines of business. In addition, as a result of the acquisition of Navigators Group, catastrophe ~~events.~~treaties in-force at the time of the acquisition related to Navigators exposures remain in-force.

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Primary Catastrophe Treaty Reinsurance Coverages as of June 30, ~~2018~~2019 [1]

Coverage Effective for the period % of layer(s) reinsurance Per occurrence limit Retention
Property losses arising from a single catastrophe event [1] [2] 1/1/2018 to 1/1/2019 89% $ 850
$ 350
Property catastrophe losses from a Personal Lines Florida hurricane 6/1/2018 to 6/1/2019 90% $ 96
[3] $ 32
Workers compensation losses arising from a single catastrophe event [4] 1/1/2018 to 12/31/2018 80% $ 350
$ 100



	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 [2]	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 $1.025 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]

~~Certain aspects~~Navigators Group catastrophe exposures are not covered by these treaties. For 2019, Navigators Group treaties in-force at the time of ~~our principal catastrophe treaty have terms that extend beyond~~ the ~~traditional one year term. While the overall treaty is placed at~~ ~~89%, each layer's placement varies slightly.~~acquisition remain in-force. For additional information on business acquisitions see Note 2 - Business Acquisition in Notes to Condensed Consolidated Financial Statements.

[2]

~~$100~~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 6/1/2018 to 5/30/2019. Retention and coverage varies by writing company. The writing company with the largest coverage under FHCF is Hartford Insurance Company of the ~~property occurrence treaty can alternatively be used as part~~Midwest, with coverage for $84 of ~~the Property Aggregate treaty referenced below.~~per event losses in excess of a $29 retention.


[3]	~~The per occurrence limit on~~Portions of this layer of coverage extend beyond the ~~FHCF treaty is~~ ~~$96~~ ~~for the~~ ~~6/1/2018 to 6/1/2019~~ ~~treaty~~traditional one year ~~based on the Company's election to purchase the required coverage from FHCF. Coverage is based on the best available information from FHCF, which was updated in January 2018.~~ 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 ~~limit~~limits shown, the ~~workers~~workers' compensation reinsurance includes a non-catastrophe, industrial accident layer, providing coverage for 80% of a $30 in per event ~~limit~~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.

In addition to the property catastrophe reinsurance coverage described in the above table, the Company has other ~~catastrophe and working layer treaties and facultative~~ reinsurance agreements that cover property catastrophe ~~losses on an aggregate excess of loss~~losses. The Per Occurrence Property Catastrophe Treaty, Additional Per Occurrence Property Catastrophe Treaty and ~~on a per risk basis. The principal property catastrophe reinsurance program and certain other reinsurance programs~~Workers' Compensation Catastrophe Treaty include a provision to reinstate limits in the event that a catastrophe loss exhausts limits on one or more layers under the treaties. In addition, covering the period from January 1, 2018 to December 31, 2018, the Company has a Property Aggregate treaty in place which provides one limit of $200 of aggregate qualifying property catastrophe losses in excess of a net retention of $825.

Reinsurance for Terrorism- For the risk of terrorism, private sector catastrophe reinsurance capacity is generally limited and largely unavailable for terrorism losses caused by nuclear, biological, chemical or radiological attacks. As such, the Company's principal reinsurance protection against large-scale terrorist attacks is the coverage currently provided through TRIPRA to the end of 2020.

TRIPRA provides a backstop for insurance-related losses resulting from any “act of terrorism”, which is certified by the Secretary of the Treasury, in consultation with the Secretary of Homeland Security and the Attorney General, for losses that exceed a threshold of industry losses of ~~$160~~$180 in ~~2018,~~2019, with the threshold increasing to $200 by 2020. Under the program, in any one calendar year, the federal government would pay a percentage of losses incurred from a certified act of terrorism after an insurer's losses exceed 20% of the Company's eligible

direct commercial earned premiums of the prior calendar year up to a combined annual aggregate limit for the federal government and all insurers of $100 billion. The percentage of losses paid by the federal government is ~~82%~~81% in ~~2018,~~2019, decreasing ~~by 1 point annually~~ to 80% in ~~the year~~ 2020. The Company's estimated deductible under the program is $1.3 billion for ~~2018.~~2019. If an act of terrorism or acts of terrorism result in covered losses exceeding the $100 billion annual industry aggregate limit, Congress would

be responsible for determining how additional losses in excess of $100 billion will be paid.

Reinsurance for A&E Reserve Development- Under an ADC reinsurance agreement, NICO assumes adverse net loss and allocated loss adjustment expense reserve development up to $1.5 billion above the Company’s net A&E reserves recorded as of December 31, ~~2016.~~2016, including reserves for A&E exposure for accident years prior to 1986 that are reported in Property & Casualty Other Operations ("Run-off A&E") and reserves for A&E exposure for accident years 1986 and subsequent from policies underwritten prior to 2016 that are reported in ongoing Commercial Lines and Personal Lines. Under retroactive reinsurance accounting, net adverse A&E reserve development after December 31, 2016 results in an offsetting reinsurance recoverable up to the $1.5 ~~billion.~~billion limit. Cumulative ceded losses up to the $650 reinsurance premium paid for the ADC are recognized as a dollar-for-dollar offset to direct losses incurred.

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

As of June 30, ~~2018, $285~~2019, $523 of ~~cumulative~~ incurred A&E losses had been ceded to NICO, leaving approximately ~~$1.2 billion~~$977 of coverage available for future adverse net reserve development, if any. Cumulative ceded losses exceeding the $650 reinsurance premium paid would result in a deferred gain. The deferred gain would be recognized over the claim settlement period in the proportion of the amount of cumulative ceded losses collected from the reinsurer to the estimated ultimate reinsurance recoveries. Consequently, until periods when the deferred gain is recognized as a benefit to earnings, cumulative adverse development of A&E claims after December 31, 2016 in excess of $650 may result in significant charges against earnings. Furthermore, there is a risk that cumulative adverse development of A&E claims could ultimately exceed the $1.5 billion treaty limit in which case all adverse development in excess of the treaty limit would be absorbed as a charge to earnings by the Company. In these scenarios, the effect of these ~~changes~~charges could be material to the Company’s consolidated operating results and liquidity.

Reinsurance for Navigators Reserve Development- Immediately after closing on the acquisition of Navigators Group, effective May 23, 2019, the Company purchased an aggregate excess of loss reinsurance agreement covering adverse reserve development (“Navigators ADC”) from National Indemnity Company ("NICO") on behalf of Navigators Insurance Company and certain of its affiliates (collectively, the “Navigators Insurers”). Under the Navigators ADC, the Navigators Insurers paid NICO a reinsurance premium of $91 in exchange for reinsurance coverage, subject to limited exceptions, of $300 of adverse net loss reserve development that attaches $100 above the Navigators Insurers' existing net loss and allocated loss

adjustment reserves as of December 31, 2018 subject to the treaty of $1.816 billion for accidents and losses prior to December 31, 2018. In addition to recognizing a$91 before tax charge to earnings in the second quarter of 2019 for the Navigators ADC reinsurance premium, the Company recognized a charge against earnings of $97 before tax in the second quarter of 2019 as a result of a review of Navigators Insurers’ net acquired reserves upon acquisition of the business. Navigators Insurers had previously recognized $52 before tax of adverse reserve development in the first quarter of 2019, including $32 of adverse development subject to the Navigators ADC. As such, reserve development of $97 before tax in the second quarter of 2019 included $68 remaining of the $100 Navigators ADC retention for 2018 and prior accident years and $29 of adverse reserve development related to the 2019 accident year which is not covered by the ADC. The $68 of reserve development for the 2018 and prior accident years recorded in the second quarter of 2019 was net of a $91 reinsurance recoverable recognized under the Navigators ADC with the Company having ceded $91 of the $300 available limit, leaving $209 of remaining limit. The Navigators ADC will be accounted for as retroactive reinsurance and future adverse reserve development, if any, would result in recognizing a deferred gain.

Reinsurance Recoverables

Property and casualty insurance product reinsurance recoverables represent loss and loss adjustment expense recoverables from a number of entities, including reinsurers and pools.

~~100~~

~~Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations~~

Property & Casualty Reinsurance Recoverables


	As of June 30, 2018			As of December 31, 2017			As of June 30, 2019			As of December 31, 2018
Paid loss and loss adjustment expenses	$	116		$	84		$	257		$	127
Unpaid loss and loss adjustment expenses	3,323			3,496			4,716			3,773
Gross reinsurance recoverables	3,439			3,580			4,973			3,900
Less: Allowance for uncollectible reinsurance	(115		)	(104		)
Allowance for uncollectible reinsurance							(148		)	(126		)
Net reinsurance recoverables	$	3,324		$	3,476		$	4,825		$	3,774

Group benefits reinsurance recoverables represent reserve for future policy benefits and unpaid loss and loss ~~adjustment~~

adjustment expenses and other policyholder funds and benefits payable that are recoverable from a number of reinsurers.

Group Benefits Reinsurance Recoverables

As of June 30, 2018 As of December 31, 2017
Future policy benefits and unpaid loss and loss adjustment expenses and other policyholder funds and benefits payable $ 241
$ 236
Less: Allowance for uncollectible reinsurance [1] —
—
Net reinsurance recoverables $ 241
$ 236



	As of June 30, 2019		As of December 31, 2018
Paid loss and loss adjustment expenses	$	9	$	12
Unpaid loss and loss adjustment expenses	234		239
Gross reinsurance recoverables	243		251
Allowance for uncollectible reinsurance [1]	—		—
Net reinsurance recoverables	$	243	$	251

[1]No allowance for uncollectible reinsurance is required as of June 30, ~~2018~~2019 and December 31, ~~2017.~~2018.

For further explanation of the Company's insurance risk management strategy, see MD&A Enterprise Risk Management Insurance Risk in The Hartford's ~~2017~~2018 Form 10-K Annual Report.

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Financial Risk

Financial risks include direct and indirect risks to the Company's financial objectives ~~coming~~ from events that impact financial market conditions ~~or prices.~~and the value of financial assets. Some events may cause correlated movement in multiple risk factors. The primary sources of financial risks are the Company's ~~general account~~ invested assets.

Consistent with its risk appetite, the Company establishes financial risk limits to control potential loss on a U.S. GAAP, statutory, and economic basis. Exposures are actively monitored and managed, with risks mitigated where appropriate. The Company uses various risk management strategies, including limiting aggregation of risk, portfolio re-balancing and hedging with over-the-counter and ~~exchange traded~~exchange-traded derivatives with counterparties meeting the appropriate regulatory and due diligence requirements. Derivatives are utilized to achieve one of four Company-approved objectives: hedging risk arising from interest rate, equity market, commodity market, credit spread and issuer default, price or currency exchange rate risk or volatility; managing liquidity; controlling transaction costs; or entering into synthetic replication transactions. Derivative activities are monitored and evaluated by the Company’s compliance and risk management teams and reviewed by senior management.

The Company identifies different categories of financial risk, including liquidity, credit, interest rate, equity and foreign currency exchange.

Liquidity Risk

Liquidity risk is the risk to current or prospective earnings or capital arising from the Company's inability or perceived inability to meet its contractual funding obligations as they come due. Stressed market conditions may impact the ability to sell assets or otherwise transact business and may result in a significant loss in value.

The Company measures and manages liquidity risk exposures and funding needs within prescribed limits across legal entities, taking into account legal, regulatory and operational limitations to the transferability of liquidity. The Company also monitors internal and external conditions, and identifies material risk changes and emerging risks that may impact ~~liquidity.~~operating cash flows or liquid assets.

For further discussion on liquidity see the section on Capital Resources and Liquidity.

Credit Risk and Counterparty Risk

Credit risk is the risk to earnings or capital due to uncertainty of an obligor’s or counterparty’s ability or willingness to meet its obligations in accordance with contractually agreed upon terms. Credit risk is comprised of three major factors: the risk of change in credit quality, or credit migration risk; the risk of default; and the risk of a change in value due to changes in credit spreads.

Sources of Credit RiskThe majority of the Company’s credit risk is concentrated in its investment holdings and use of derivatives, but it is also present in the Company’s ceded reinsurance activities and various insurance ~~portfolios.~~products.

ImpactA decline in creditworthiness is typically ~~associated with~~reflected as an increase in an investment’s credit spread and associated decline in value, potentially ~~result~~resulting in an increase in other-than-temporary ~~impairments~~impairment and an increased probability of a realized loss upon sale. In certain instances, counterparties may default on their obligations and the Company may realize a loss on default. Premiums receivable and reinsurance recoverables are also subject to credit risk based on the counterparty’s unwillingness or inability to pay.

ManagementThe objective of the Company’s enterprise credit risk management strategy is to identify, quantify and manage credit risk ~~on an~~in aggregate ~~portfolio basis~~ and to limit potential losses in accordance with ~~an established~~the Company's credit risk management policy. The Company ~~primarily~~ manages its credit risk by managing aggregations of risk, holding a diversified mix of ~~investment grade~~ issuers and counterparties across its investment, reinsurance and insurance ~~portfolios.~~portfolios and limiting exposure to any specific reinsurer or counterparty. Potential credit losses ~~are also limited within portfolios by diversifying across~~can be mitigated through diversification (e.g., geographic regions, asset types, industry sectors), hedging and ~~sectors.~~

~~101~~

~~Part I - Item 2. Management's Discussion and Analysis~~the use of ~~Financial Condition and Results of Operations~~collateral to reduce net credit exposure.

The Company manages credit risk on an ~~on-going~~ongoing basis through the use of various ~~processes~~analyses and ~~analyses.~~governance processes. Both the investment and reinsurance areas have ~~formulated~~formal policies and procedures for counterparty approvals and authorizations, which establish minimum levels of creditworthiness and financial stability. Credits considered for investment are ~~subjected~~subject to underwriting ~~reviews. Within the investment portfolio,~~reviews and private securities are subject to ~~committee review for~~management approval. Mitigation strategies vary across the three sources of credit risk, but may include:

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~~institutions;

Requiring collateral; and

Non-renewing policies/contracts or reinsurance treaties.

The Company has developed credit exposure thresholds which are based upon counterparty ratings. Aggregate counterparty credit quality and exposure are monitored on a daily basis utilizing an enterprise-wide credit exposure information system that contains data on issuers, ratings, exposures, and credit limits. Exposures are tracked on a current and potential basis and aggregated by ultimate parent of the counterparty across investments, reinsurance receivables, insurance products with credit risk, and derivatives.

As of June 30, ~~2018~~2019, the Company had no investment exposure to any credit concentration risk of a single issuer or counterparty greater than 10% of the Company’s stockholders' equity, other than the U.S. government and certain U.S. government agencies. For further discussion of concentration of credit risk in the investment portfolio, see the Concentration of Credit Risk section in Note 6 - Investments of Notes to Condensed Consolidated Financial Statements.

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Credit Risk of Derivatives

The Company uses various derivative counterparties in executing its derivative transactions. The use of counterparties creates credit risk that the counterparty may not perform in accordance with the terms of the derivative transaction.

Downgrades to the credit ratings of the Company’s insurance operating companies may have adverse implications for its use of derivatives. In some cases, downgrades may give derivative counterparties for ~~over-the-counter~~OTC derivatives and clearing brokers for OTC-cleared derivatives the right to cancel and settle outstanding derivative trades or require additional collateral to be posted. In addition, downgrades may result in counterparties and clearing brokers becoming unwilling to engage in or clear additional derivatives or may require additional collateralization before entering into any new trades.

The Company also has derivative counterparty exposure policies which limit the Company’s exposure to credit risk.

~~For~~ Credit exposures are generally quantified based on the ~~company’s~~prior business day’s net fair value, including income accruals, of all derivative programs, the maximum uncollateralized threshold for a derivative counterparty for a single legal entity is $10. The Company currently transacts OTC derivatives in one legal entity that have a threshold greater than

~~zero. The maximum combined threshold for~~positions transacted with a single counterparty ~~across all~~for each separate legal ~~entities that use~~entity. The Company enters into collateral arrangements in connection with its derivatives positions and ~~have a threshold~~collateral is pledged to or held by, or on behalf of, the Company to the extent the exposure is greater than zero, ~~is $10. Based on the contractual terms of the collateral agreements, these thresholds may be immediately reduced due~~subject to a downgrade in either party’s credit rating. For further discussion, see the Derivative Commitments section of Note 13 Commitments and Contingencies of Notes to Condensed Consolidated Financial Statements.

minimum transfer thresholds. For the six months ended June 30, ~~2018,~~2019, the Company incurred no losses on derivative instruments due to counterparty default. For further discussion, see the Derivative Commitments section of Note 12 Commitments and Contingencies of Notes to Condensed Consolidated Financial Statements.

Use of Credit Derivatives

The Company may also use credit default swaps to manage credit exposure or to assume credit risk to enhance yield.

Credit Risk Reduced Through Credit Derivatives

The Company uses credit derivatives to purchase credit protection with respect to a single entity or referenced index. The Company purchases credit protection through credit default swaps to economically hedge and manage credit risk of certain fixed maturity investments across multiple sectors of the investment portfolio.

Credit Risk Assumed Through Credit Derivatives

The Company also enters into credit default swaps that assume credit risk as part of replication transactions. Replication transactions are used as an economical means to synthetically replicate the characteristics and performance of assets that are permissible investments under the Company’s investment policies. These swaps reference investment grade single corporate issuers and indexes.

For further information on credit derivatives, see Note 7 - ~~Derivative Instruments~~Derivatives of Notes to Condensed Consolidated Financial Statements.

Interest Rate Risk

Interest rate risk is the risk of financial loss due to adverse changes in the value of assets and liabilities arising from movements in interest rates. Interest rate risk encompasses exposures with respect to changes in the level of interest rates, the shape of the term structure of rates and the volatility of

interest rates. Interest rate risk does not include exposure to changes in credit spreads.

Sources of Interest Rate RiskThe Company has exposure to interest ~~rates~~rate risk arising from its fixed maturity investments, commercial mortgage loans, capital securities ~~liabilities such as structured settlements and terminal funding agreement liabilities~~issued by the Company and discount rate assumptions associated with the Company’s claim reserves and pension and other post retirement benefit obligations. ~~In addition, certain product liabilities expose the Company to interest rate risk, in particular short and long-term disability claim reserves.~~

ImpactChanges in interest rates from current levels can have both favorable and unfavorable effects for the Company.

ManagementThe Company ~~primarily~~ manages its exposure to interest rate risk by constructing investment portfolios that seek to protect the firm from the economic impact associated with changes in interest rates by setting portfolio duration targets that are aligned with the duration of the liabilities that they support. The Company analyzes interest rate risk using various models including parametric models and cash flow simulation under various market scenarios of the liabilities and their supporting investment portfolios. Key metrics that the Company uses to quantify its exposure to interest rate risk inherent in its invested assets and the associated liabilities include duration, convexity and key rate duration.

The Company ~~may also~~ utilizes a variety of derivative instruments to mitigate interest rate risk associated with its investment

~~102~~

~~Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations~~

portfolio or to hedge liabilities. Interest rate caps, floors, swaps, swaptions, and futures may be used to manage portfolio duration.

Equity Risk

Equity risk is ~~defined as~~ the risk of financial loss due to changes in the value of global equities or equity indices.

Sources of Equity RiskThe Company has exposure to equity risk from invested assets, ~~mutual fund assets under management, and~~ assets that support the Company’s pension and other post-retirement benefit ~~plans.~~ plans, and fee income derived from Hartford Funds assets under management. In addition, the Company has equity exposure through its 9.7% ownership interest in the limited partnership, Hopmeadow Holdings LP, that owns the life and annuity business sold in 2018. For further information, see Note 20 - Business Dispositions and Discontinued Operations of Notes to Consolidated Financial Statements included in the Company’s 2018 Form 10-K Annual Report.

ImpactThe investment portfolio is exposed to losses from market declines affecting equity securities, alternative assets and limited partnerships which could negatively impact the Company's reported earnings. For assets supporting pension and other post-retirement benefit plans, the Company may be required to make additional plan contributions if equity investments in the plan portfolios decline in value. Hartford Funds earnings are also significantly influenced by the U.S. and other equity markets. Generally, declines in equity markets will reduce the value of assets under management and the amount of fee income generated from those assets. Increases in equity markets will generally have the inverse impact.

ManagementThe Company uses various approaches in managing its equity exposure, including limits on the proportion of assets invested in equities, diversification of the equity portfolio, and hedging of changes in equity indices. For assets

~~Declines in equity markets may result in losses due to sales or reductions in market value that are recorded within our reported earnings. Declines in equity markets may also decrease the value~~

Part I - Item 2. Management's Discussion and Analysis of ~~limited partnerships~~Financial Condition and ~~other alternative investments or result in losses on derivatives, including on embedded product derivatives, thereby negatively impacting our reported earnings.~~Results of Operations

~~The Company’s mutual funds are significantly influenced by the~~

~~U.S. and other equity markets. Generally, declines in equity~~

~~markets will reduce the value of assets under management and~~

~~the amount of fee income generated from those assets.~~

~~Increases in equity markets will generally have the inverse impact.~~

~~For the assets that support its~~

supporting pension ~~plans~~ and other post-retirement benefit plans, the ~~Company may be required to make additional plan contributions if equity investments in the plan portfolio decline in value. The~~ asset allocation mix is reviewed on

a periodic basis. In order to minimize ~~the~~ risk, the pension plans maintain a listing of permissible and prohibited investments and impose concentration limits and investment quality requirements on permissible investment options.

Foreign Currency Exchange Risk

Foreign currency exchange risk is the risk of financial loss due to changes in the relative value between currencies.

The functional currency of The Company's principal insurance subsidiaries is the U.S. dollar. The Company has foreign currency exchange risk inby holding non-U.S. dollar denominated investments, which primarily consist of fixed maturity and equity investments and foreign denominated cash.

The open foreign currency exposure of non-U.S. dollar denominated investments will most commonly be reduced through the sale of the assets or through hedges using currency futures/forwards/swaps.

In ~~order~~addition, as a global company, we transact business in multiple currencies. Many of our non-U.S. subsidiaries maintain assets and liabilities in local currencies that differ from their functional currency. We manage our foreign currency exchange rate risk primarily through asset-liability matching. In addition to ~~manage the currency risk related to any~~holding non-U.S. dollar denominated ~~liability contracts, the Company enters into foreign currency swaps or holds~~assets to support non-U.S. dollar denominated ~~investments.~~liabilities, legal entity required capital is invested in non-U.S. dollar currencies in order to satisfy regulatory requirements and to support local insurance operations exposing the Company to the fluctuation of the U.S. dollar.

Investment Portfolio Risk

The following table presents the Company’s fixed maturities, AFS, by credit quality. The credit ratings referenced throughout this section are based on availability and are generally the midpoint of the available ratings among Moody’s, S&P, ~~Fitch~~ and ~~Morningstar.~~Fitch. If no rating is available from a rating agency, then an internally developed rating is used.

																									Fixed Maturities by Credit Quality
	June 30, 2018						December 31, 2017						June 30, 2019						December 31, 2018
	Amortized Cost		Fair Value		Percent of Total Fair Value		Amortized Cost		Fair Value		Percent of Total Fair Value		Amortized Cost		Fair Value		Percent of Total Fair Value		Amortized Cost		Fair Value		Percent of Total Fair Value
United States Government/Government agencies	$	4,765	$	4,722	13.0	%	$	4,492	$	4,536	12.3	%	$	5,566	$	5,714	13.9	%	$	4,446	$	4,430	12.4	%
AAA	5,919		6,027		16.7	%	5,864		6,072		16.4	%	6,008		6,214		15.1	%	6,366		6,440		18.1	%
AA	6,927		7,096		19.6	%	7,467		7,810		21.1	%	7,520		7,890		19.1	%	6,861		6,985		19.6	%
A	8,767		8,846		24.4	%	8,510		8,919		24.1	%	9,981		10,552		25.6	%	8,314		8,370		23.5	%
BBB	8,197		8,157		22.5	%	7,632		7,931		21.5	%	8,834		9,246		22.5	%	8,335		8,163		22.9	%
BB & below	1,338		1,346		3.8	%	1,647		1,696		4.6	%	1,520		1,550		3.8	%	1,281		1,264		3.5	%
Total fixed maturities, AFS	$	35,913	$	36,194	100	%	$	35,612	$	36,964	100	%	$	39,429	$	41,166	100.0	%	$	35,603	$	35,652	100.0	%

The fair value of fixed maturities, AFS ~~decreased~~increased as compared to December 31, ~~2017,~~2018, primarily due ~~a decrease~~to the transfer in of assets related to the acquisition of Navigators Group as well as an increase in valuations due to ~~higher~~lower interest rates and ~~wider credit spreads. Also, municipal bonds were reallocated into corporate bonds and U.S. government agency securities during the period. Fixed maturities,~~tighter

credit spreads. Fixed maturities, FVO, are not included in the preceding table. For further discussion on FVO securities, see Note 5 - Fair Value Measurements of Notes to Condensed Consolidated Financial Statements.

~~103~~

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

																																													Securities by Type
	June 30, 2018											December 31, 2017											June 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		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	$	878	$	4	$	(3	)	$	879	2.4	%	$	925	$	7	$	(2	)	$	930	2.5	%	$	874	$	15	$	—		$	889	2.2	%	$	1,159	$	5	$	(1	)	$	1,163	3.3	%
Other	115		—		—			115		0.3	%	194		2		—			196		0.5	%	136		4		—			140		0.3	%	113		—		—			113		0.3	%
Collateralized debt obligations ("CDOs")
CLOs	1,091		1		(3		)	1,089		3.0	%	1,257		3		—			1,260		3.4	%
Collateralized loan obligations ("CLOs")																							1,929		4		(8		)	1,925		4.7	%	1,455		2		(20		)	1,437		4.0	%
CMBS
Agency [1]	1,475		10		(34		)	1,451		4.0	%	1,199		16		(14		)	1,201		3.2	%	1,535		40		(5		)	1,570		3.8	%	1,447		13		(33		)	1,427		4.0	%
Bonds	1,738		12		(37		)	1,713		4.8	%	1,726		32		(9		)	1,749		4.7	%	1,995		85		(1		)	2,079		5.1	%	1,845		13		(29		)	1,829		5.1	%
Interest only (“IOs”)	323		9		(2		)	330		0.9	%	379		10		(3		)	386		1.0	%
Interest only																							244		14		(2		)	256		0.6	%	289		9		(2		)	296		0.8	%
Corporate																							��
Basic industry	597		13		(13		)	597		1.6	%	523		28		(1		)	550		1.5	%	667		27		(2		)	692		1.7	%	604		8		(21		)	591		1.7	%
Capital goods	1,087		13		(22		)	1,078		3.0	%	1,050		44		(4		)	1,090		2.9	%	1,506		58		(4		)	1,560		3.7	%	1,132		8		(31		)	1,109		3.1	%
Consumer cyclical	947		11		(20		)	938		2.6	%	857		33		(2		)	888		2.4	%	1,033		40		(3		)	1,070		2.6	%	943		9		(29		)	923		2.6	%
Consumer non-cyclical	1,903		16		(52		)	1,867		5.2	%	1,643		46		(7		)	1,682		4.6	%	2,248		94		(3		)	2,339		5.7	%	1,936		11		(71		)	1,876		5.3	%
Energy	1,122		19		(25		)	1,116		3.1	%	1,056		43		(3		)	1,096		3.0	%	1,369		72		(3		)	1,438		3.5	%	1,156		14		(43		)	1,127		3.1	%
Financial services	3,338		21		(76		)	3,283		9.1	%	2,722		77		(10		)	2,789		7.5	%	3,781		140		(14		)	3,907		9.5	%	3,368		17		(99		)	3,286		9.2	%
Tech./comm.	1,626		40		(44		)	1,622		4.5	%	1,618		87		(9		)	1,696		4.6	%	2,396		145		(4		)	2,537		6.2	%	1,720		34		(54		)	1,700		4.8	%
Transportation	532		4		(12		)	524		1.4	%	555		18		—			573		1.6	%	650		29		—			679		1.6	%	548		4		(18		)	534		1.5	%
Utilities	2,091		55		(65		)	2,081		5.7	%	2,097		110		(19		)	2,188		5.9	%	2,114		105		(15		)	2,204		5.4	%	2,017		43		(69		)	1,991		5.6	%
Other	250		—		(7		)	243		0.7	%	249		4		(1		)	252		0.7	%	314		8		—			322		0.8	%	272		—		(11		)	261		0.7	%
Foreign govt./govt. agencies	1,149		12		(28		)	1,133		3.1	%	1,071		43		(4		)	1,110		3.0	%	1,025		48		(1		)	1,072		2.6	%	866		7		(26		)	847		2.4	%
Municipal bonds
Taxable	581		16		(14		)	583		1.6	%	537		30		(5		)	562		1.5	%	681		44		—			725		1.8	%	629		14		(17		)	626		1.8	%
Tax-exempt	10,097		492		(30		)	10,559		29.2	%	11,206		724		(7		)	11,923		32.3	%	8,887		666		—			9,553		23.2	%	9,343		407		(30		)	9,720		27.3	%
RMBS
Agency	1,517		4		(36		)	1,485		4.1	%	1,530		10		(4		)	1,536		4.2	%	2,464		39		(2		)	2,501		6.1	%	1,508		7		(29		)	1,486		4.2	%
Non-agency	600		3		(5		)	598		1.7	%	227		3		—			230		0.6	%	1,280		21		—			1,301		3.1	%	933		5		(6		)	932		2.6	%
Alt-A	49		3		—			52		0.1	%	58		4		—			62		0.2	%	92		4		—			96		0.2	%	43		4		—			47		0.1	%
Sub-prime	1,034		38		—			1,072		3.0	%	1,170		46		—			1,216		3.3	%	642		26		—			668		1.6	%	786		28		—			814		2.3	%
U.S. Treasuries	1,773		35		(22		)	1,786		4.9	%	1,763		46		(10		)	1,799		4.9	%	1,567		77		(1		)	1,643		4.0	%	1,491		41		(15		)	1,517		4.2	%
Fixed maturities, AFS	35,913		831		(550		)	36,194		100.0	%	35,612		1,466		(114		)	36,964		100	%
Equity securities
Financial services												115		19		—			134		13.3	%
Other												792		102		(16		)	878		86.7	%
Equity securities, AFS [2]												907		121		(16		)	1,012		100	%
Total AFS securities	$	35,913	$	831	$	(550	)	$	36,194			$	36,519	$	1,587	$	(130	)	$	37,976
Total fixed maturities, AFS																							$	39,429	$	1,805	$	(68	)	$	41,166	100.0	%	$	35,603	$	703	$	(654	)	$	35,652	100.0	%
Fixed maturities, FVO								$	36										$	41										$	49										$	22
Equity securities, at fair value [2]								$	1,003
Equity securities, at fair value																														$	1,533										$	1,214

The fair value of AFS securities ~~decreased~~increased as compared to December 31, ~~2017,~~2018, primarily due to ~~a decrease~~the transfer in of assets related to the acquisition of Navigators Group as well as an increase in valuations due to ~~higher~~lower interest rates and ~~wider~~tighter credit spreads. ~~Also, municipal bonds were reallocated into corporate bonds and U.S. government agency securities during the period.~~

~~Financial Services~~Commercial & Residential Real Estate

~~The Company’s investment in the financial services sector is predominantly through investment grade banking and insurance institutions.~~ The following table presents the Company’s ~~fixed~~exposure to CMBS and RMBS by current credit quality included in the preceding Securities by Type table.

~~104~~

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

~~maturities and equity, AFS securities in the financial services sector that are included in the preceding Securities by Type table.~~

Financial Services by Credit Quality
June 30, 2018 December 31, 2017
Amortized Cost Fair Value Net Unrealized Gain/(Loss) Amortized Cost Fair Value Net Unrealized Gain/(Loss)
AAA $ 28
$ 29
$ 1
$ 25
$ 26
$ 1
AA 422
423
1
147
150
3
A 1,598
1,566
(32 ) 1,525
1,575
50
BBB 1,200
1,175
(25 ) 1,061
1,089
28
BB & below 90
90
—
79
83
4
Total [1] $ 3,338
$ 3,283
$ (55 ) $ 2,837
$ 2,923
$ 86



Exposure to CMBS & RMBS Bonds as of June 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]	$	1,535	$	1,570	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	1,535	$	1,570
Bonds	1,056		1,097		474		489		392		416		51		55		22		22		1,995		2,079
Interest Only	158		167		75		79		2		2		7		7		2		1		244		256
Total CMBS	2,749		2,834		549		568		394		418		58		62		24		23		3,774		3,905
RMBS
Agency	2,454		2,490		10		11		—		—		—		—		—		—		2,464		2,501
Non-Agency	894		909		241		246		115		116		29		29		1		1		1,280		1,301
Alt-A	39		40		10		10		13		13		9		9		21		24		92		96
Sub-Prime	19		20		60		61		202		210		154		161		207		216		642		668
Total RMBS	3,406		3,459		321		328		330		339		192		199		229		241		4,478		4,566
Total CMBS & RMBS	$	6,155	$	6,293	$	870	$	896	$	724	$	757	$	250	$	261	$	253	$	264	$	8,252	$	8,471



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 ~~equity, AFS~~ securities with ~~an amortized cost and fair value of~~ ~~$115~~ ~~and~~ ~~$134~~ ~~as of~~ ~~December 31, 2017~~. Effective January 1, 2018, with the adoption of new accounting guidance for financial instruments, equity securities, AFS were reclassified to equity securities, at fair value and are excluded from the table above as of ~~June 30, 2018~~.

The Company's fair value of investments in the financial services sector increased as compared to December 31, 2017 due to purchases of corporate securities, slightly offset by a decline in valuations due to higher interest rates and wider credit spreads.

~~Commercial Real Estate~~

~~The following table presents the Company’s exposure to CMBS bonds by current credit quality and vintage year included in the~~

preceding Securities by Type table. Credit protection represents the current weighted average percentage of the outstanding capital structure subordinated to the Company’s investment holding that is available to absorb losses before the security incurs the first dollar loss of principal and excludes any equity interest or property value in excess of outstanding debt.

Exposure to CMBS Bonds as of June 30, 2018
AAA AA A BBB BB and Below Total
Vintage Year [1] Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value
2008 & Prior $ 26
$ 27
$ 5
$ 5
$ —
$ —
$ —
$ —
$ 9
$ 9
$ 40
$ 41
2009 —
—
2
2
—
—
—
—
—
—
2
2
2010 18
18
—
—
—
—
—
—
—
—
18
18
2011 38
39
—
—
2
2
—
—
—
—
40
41
2012 17
17
9
8
—
—
5
5
—
—
31
30
2013 —
—
11
11
36
37
1
1
—
—
48
49
2014 284
284
36
36
43
42
4
4
—
—
367
366
2015 136
132
111
110
155
156
8
9
—
—
410
407
2016 167
160
107
104
78
79
9
9
—
—
361
352
2017 152
145
142
136
—
—
—
—
—
—
294
281
2018 62
61
5
5
42
42
18
18
—
—
127
126
Total $ 900
$ 883
$ 428
$ 417
$ 356
$ 358
$ 45
$ 46
$ 9
$ 9
$ 1,738
$ 1,713
Credit protection 30.9% 21.5% 14.3% 12.1% 69.3% 24.9%

~~105~~

~~Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations~~

Exposure to CMBS Bonds as of December 31, 2017
AAA AA A BBB BB and Below Total
Vintage Year [1] Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value
2008 & Prior $ 32
$ 32
$ 5
$ 6
$ —
$ —
$ —
$ —
$ 9
$ 9
$ 46
$ 47
2009 —
—
2
2
—
—
—
—
—
—
2
2
2010 18
19
—
—
—
—
—
—
—
—
18
19
2011 40
42
—
—
2
2
—
—
—
—
42
44
2012 17
18
9
9
—
—
5
5
—
—
31
32
2013 —
—
11
11
36
38
—
—
—
—
47
49
2014 284
292
36
37
43
43
4
4
5
5
372
381
2015 206
207
111
112
155
159
25
25
3
3
500
506
2016 201
200
107
107
78
81
9
9
—
—
395
397
2017 131
131
142
141
—
—
—
—
—
—
273
272
Total $ 929
$ 941
$ 423
$ 425
$ 314
$ 323
$ 43
$ 43
$ 17
$ 17
$ 1,726
$ 1,749
Credit
protection 30.8% 21.4% 14.1% 11.3% 41.0% 25.1%


~~[1]~~	~~The vintage year represents the year the pool~~pools of loans ~~was originated.~~issued by the Small Business Administration which are backed by the full faith and credit of the U.S. government.

The Company also has exposure to commercial mortgage ~~loans as presented in the following table.~~loans. These loans are collateralized by ~~a variety of commercial~~real estate properties ~~and~~that are diversified both geographically throughout the United States and by property type. These loans are ~~primarily in~~originated by the ~~form of~~Company as high quality whole loans, ~~where~~

~~the Company is the sole lender, but may include participations.~~and are participated out to third parties. Loan participations are loans where the Company has purchased or retained a portion of an outstanding loan or package of loans and participates on a pro-rata basis in collecting interest and principal pursuant to the terms of the participation agreement.

Commercial Mortgage Loans
June 30, 2018 December 31, 2017
Amortized Cost [1] Valuation Allowance Carrying Value Amortized Cost [1] Valuation Allowance Carrying Value
Whole loans $ 3,356
$ (1 ) $ 3,355
$ 3,176
$ (1 ) $ 3,175
Total $ 3,356
$ (1 ) $ 3,355
$ 3,176
$ (1 ) $ 3,175

~~[1]Amortized~~As of June 30, 2019, commercial mortgage loans had an amortized cost ~~represents~~of $3.6 billion and carrying value ~~prior to~~of $3.6 billion, with no valuation ~~allowances, if any.~~allowance. As of December 31, 2018,

commercial mortgage loans had an amortized cost of $3.7 billion and carrying value of $3.7 billion, with a valuation allowance of $1.

The Company funded ~~$298~~$127 of commercial ~~whole~~mortgage loans with a weighted average loan-to-value (“LTV”) ratio of ~~61%~~62% and a weighted average yield of ~~4.3%~~4.2% during the six months ended June 30, ~~2018.~~2019. The Company continues to originate commercial ~~whole~~ loans within primary markets, such as office, industrial and multi-family, focusing on loans with strong LTV ratios and high quality property collateral. There were no mortgage loans held

for sale as of June 30, ~~2018~~2019 or December 31, ~~2017.~~2018.

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Municipal Bonds

The following table presents the Company's exposure to

municipal bonds by type and weighted average credit quality included in the preceding Securities by Type table.

~~Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations~~

As of both June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the largest issuer concentrations were the New York Dormitory Authority, the New York City Transitional Finance Authority, and the Commonwealth of Massachusetts, which each comprised less than 3% of the municipal bond portfolio and were primarily comprised of general obligation and revenue bonds. In total, municipal bonds make up ~~24%~~20% of the fair value of the Company's investment portfolio. The Company has evaluated its portfolio allocation to municipal bonds with respect to the changes in corporate income tax rates that began in 2018. While tax-exempt municipal debt remains a high quality asset class with very low expected defaults and is a source of portfolio diversification, the Company reduced exposure to the sector through both asset sales and principal repayments. The Company will continue to actively assess the impacts of the income tax rate changes on the municipal market and may continue to make portfolio changes

~~over time based upon our view of the value of the sector.~~

Limited Partnerships and Other Alternative Investments

The following ~~tables present~~table presents the Company’s investments in limited partnerships and other alternative investments which include hedge funds, real estate funds, and private equity funds. Real estate funds consist of investments primarily in real estate joint ~~venture~~ventures and, to a lesser extent, equity ~~funds, including some funds with public market exposure.~~funds. Private equity funds primarily consist of investments in funds whose assets typically consist of a diversified pool of investments in small to mid-sized non-public businesses with high growth potential as well as limited exposure to public markets.

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Available-for-sale Securities — Unrealized Loss Aging

The total gross unrealized losses were $~~550~~68 as of June 30, ~~2018~~2019 and have ~~increased~~decreased $~~420, or~~ ~~323%~~586, from December 31, ~~2017~~2018, primarily due to ~~higher~~lower interest rates and ~~wider~~tighter credit spreads. As of June 30, ~~2018~~2019, $~~542~~63 of the gross unrealized losses were associated with securities depressed less than 20% of cost or amortized cost. The remaining $85 of gross unrealized losses were associated with securities depressed greater than 20%. The securities depressed more than 20% are primarily securities with exposure to commercial real estate which are depressed primarily due to ~~higher rates~~wider spreads since the securities were purchased.

As part of the Company’s ongoing security monitoring process,

the Company has reviewed its AFS securities in an unrealized loss position and concluded that these securities are temporarily depressed and are expected to recover in value as the securities approach maturity or as market spreads tighten. For these securities in an unrealized loss position where a credit impairment has not been recorded, the Company’s best estimate of expected future cash flows are sufficient to recover the amortized cost basis of the security. Furthermore, the Company neither has an intention to sell nor does it expect to be required to sell these securities. For further information regarding the Company’s impairment analysis, see Other-Than-Temporary Impairments in the Investment Portfolio Risks and Risk Management section of this MD&A.

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

																	Other-than-temporary Impairments Recognized in Earnings by Security Type
	Three Months Ended June 30,				Six months ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017		2019		2018		2019		2018
Credit Impairments
CMBS	$	—	$	1	$	—	$	2
Equity Impairments	—		1		—		1
Intent-to-Sell Impairments	—		—		—		—
Corporate									$	—	$	—	$	2	$	—
Total	$	—	$	2	$	—	$	3	$	—	$	—	$	2	$	—

Three and six months ended June 30, ~~2018~~2019

~~For~~Impairments recognized in earnings were comprised of credit impairments of $2 for the ~~three and~~ six months ended June 30, ~~2018, there~~2019. The credit impairments were primarily related to one corporate security experiencing issuer-specific financial difficulties. There were no impairments recognized in ~~earnings.~~earnings in the second quarter of 2019.

The Company incorporates its best estimate of future performance using internal assumptions and judgments that are informed by economic and industry specific trends, as well as our expectations with respect to security specific developments.

Non-credit impairments recognized in other comprehensive income were $0 ~~and$2~~and $2 for the three and six months ended June 30, ~~2018,~~2019, respectively.

Future impairments may develop as the result of changes in intent-to-sell specific securities that are in an unrealized loss position or if ~~actual results underperform~~modeling assumptions, such as macroeconomic factors or security specific developments, change unfavorably from our current modeling assumptions, ~~which may be the result of, but are not limited to, macroeconomic factors and security-specific performance below current~~resulting in lower cash flow expectations.

Three and six months ended June 30, ~~2017~~2018

~~For~~There were no impairments recognized in earnings.

Non-credit impairments recognized in other comprehensive income were $0 and $2 for the three and six months ended June 30, ~~2017, impairments recognized in earnings were comprised of credit impairments of $1 and $2, respectively and impairments on equity of $1 and $1,~~2018 , respectively. The credit impairments were primarily related to interest-only CMBS and were identified through security specific review of the expected future cash flows. The impairments on equity securities were in an unrealized loss position and the Company no longer believed the securities would recover in the foreseeable future. The Company incorporates its best estimate of future performance using internal assumptions and judgments that are informed by economic and industry specific trends, as well as our expectations with respect to security specific developments.

CAPITAL RESOURCES AND LIQUIDITY

The following section discusses the overall financial strength of The Hartford and its insurance operations including their ability to generate cash flows from each of their business segments, borrow funds at competitive rates and raise new capital to meet operating and growth needs over the next twelve months.

SUMMARY OF CAPITAL RESOURCES AND LIQUIDITY

Capital available atto the holding company as of June 30, ~~2018:~~2019:

~~$2.3 billion~~


•	$0.8 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 June 30, 2019.


•	Borrowings available under a commercial paper program to a maximum of $750. As of June 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.

2019 expected dividends and other sources of capital:


•	P&C - The Company does not anticipate receiving net dividends from its property and casualty insurance subsidiaries over the remainder of 2019.


•	Group Benefits - Hartford Life and Accident Insurance Company ("HLA") has $380 dividend capacity for 2019, and anticipates paying $250 to $300 in dividends in 2019 including $150 received year to date.


•	Hartford Funds - Anticipates paying $100 to $125 in dividends in 2019, including $84 received year to date.

In July, 2019, the Company received a $421 refund of AMT credits of which HFSG Holding Company

~~A senior unsecured five-year revolving credit facility was amended on June 11, 2018~~ received $314. Year to ~~among~~date, HFSG Holding Company has received cash tax receipts of $528, including the $314 of AMT credits and $214 from its subsidiaries as a result of utilizing net operating loss carryovers and other ~~changes, decrease~~tax benefits. Over the ~~aggregate principal amount~~remainder of ~~the facility from $1 billion~~2019, HFSG Holding Company anticipates additional cash tax receipts of approximately $100 to ~~$750~~ ~~and extend the maturity date to March 29, 2023.~~ No ~~borrowings were outstanding as~~$200, including realization of ~~June 30, 2018~~.

~~As of~~ ~~June 30, 2018, The Hartford's maximum borrowings available under the commercial paper program was~~ ~~$1 billion~~ ~~and there was~~ no commercial paper outstanding. On July 19, 2018, the Board of Directors revised the Company's commercial paper issuance authorization to $750 to align the program with the Company's $750 five year revolving credit facility which became effective on June 11, 2018.

net operating losses.

Expected liquidity requirements for the next twelve months as of June 30, ~~2018:~~2019:

$~~413~~500 maturing debt payment ~~due~~ in ~~January~~March of ~~2019~~2020.

~~$275 of interest on debt~~

~~$435~~ ~~of common stockholders dividends, subject to the discretion of the Board of Directors~~


•
$290 of interest on debt.

~~Equity repurchase program:~~

~~The Company does not currently have an equity repurchase authorization in 2018.~~


•
$21 dividends on preferred stock, subject to the discretion of the Board of Directors.

~~2018 dividend capacity:~~

For the remainder of 2018, the Company has $125 remaining dividend capacity for property and casualty (P&C) insurance subsidiaries. During the first six months of 2018, P&C subsidiaries paid $2.1 billion of dividends, of which $1.9 billion was primarily funded by cash proceeds and pre-closing dividends from the sale of Talcott Resolution that was paid to P&C as a principal paydown on an intercompany note.

~~Hartford Life and Accident Insurance Company ("HLA") has no dividend capacity for 2018 and does not anticipate paying dividends in 2018.~~

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations


•	$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.

Equity repurchase program:

•

Authorization for equity repurchases of up to $1.0 billion effective through December 31, 2020. Under the program the company repurchased 0.5 million shares during the period from January 1, 2019 to June 30, 2019 for $27 with $973 of authorization remaining as of June 30, 2019. During the period from July 1, 2019 to July 31, 2019, the Company repurchased 0.3 million common shares for $16 with $957 of authorization remaining as of July 31, 2019.

Liquidity Requirements and Sources of Capital

The Hartford Financial Services Group, Inc. (Holding Company)

The liquidity requirements of the holding company of The Hartford Financial Services Group, Inc. ~~(“HFSG Holding Company”)~~ have been and will continue to be met by HFSG Holding Company’s fixed ~~maturities,~~maturities; short-term investments and ~~cash, and~~cash; dividends, ~~from its subsidiaries,~~ principally from its ~~insurance operations, as well as~~subsidiaries; and tax receipts, including realization of HFSG Holding Company net operating losses and refunds of prior period AMT credits. In addition, HFSG Holding Company can meet its liquidity requirements through the issuance of common stock, debt or other capital securities and borrowings from its credit facilities, as needed.

As of June 30, ~~2018,~~2019, HFSG Holding Company held fixed maturities, short-term investments, and cash of ~~$2.3~~$0.8 billion. Expected liquidity requirements of ~~the~~ HFSG Holding Company for the next twelve months include payment of the ~~6.0%~~5.5% senior note of ~~$413~~$500 due at maturity in ~~January 2019,~~March of 2020, the interest payments on debt of approximately ~~$275,~~$290 which includes $15 related to Navigators Group, preferred stock dividends of approximately $21 and common stockholder dividends of approximately $440, subject to the discretion of the Board of ~~Directors, of approximately $435.~~Directors.

Debt

On ~~March~~January 15, ~~2018,~~2019, The Hartford issued $500 of 4.4% senior notes ("4.4% Notes") due March 15, 2048 for net proceeds of approximately $490, after deducting underwriting discounts and expenses from the offering. Interest is payable semi-annually in arrears on March 15 and September 15, commencing September 15, 2018. The Hartford, at its option, can redeem the 4.4% Notes at any time, in whole or in part, at a redemption price equal to the greater of 100% of the principal amount being redeemed or a make-whole amount based on a comparable maturity US Treasury plus 25 basis points, plus any accrued and unpaid interest, except the option of a make-whole payment is not applicable within the final six months of maturity. The Hartford used a portion of the net proceeds from this issuance to repay $320repaid at maturity of the ~~Company’s 6.3% notes due March 15, 2018, and the balance of the proceeds will be used for general corporate purposes.~~

~~On June 15, 2018 The Hartford completed its previously announced redemption of $500 aggregate~~$413 principal amount of its ~~8.125% Fixed-to-Floating Rate Junior Subordinated Debentures due 2068. In connection~~6.0% senior notes.

Senior notes with ~~the initial offering~~a par value of $265 were acquired as part of the ~~8.125% debentures, the Company entered into a replacement capital covenant ("RCC"), and under the terms~~Navigators Group acquisition. For additional information on Debt, see Note 10- Debt of ~~the RCC, if the Company redeemed the 8.125% debentures at any time prior~~Notes to June 15, 2048 it could only do so with the proceeds from the sale of certain qualifying replacement securities. The 3 month Libor plus 2.125% debentures issued February 15, 2017 are qualifying replacement securities within the definition of the RCC. In connection with this redemption, the Company recognized a $6 loss on extinguishment of debt for unamortized deferred debt issuance costs.Condensed Consolidated Financial Statements

Equity

~~The~~In February, 2019, the Company ~~does not currently have an~~announced a $1.0 billion share repurchase authorization by the Board of Directors which is effective through December 31, 2020. Based on projected holding company resources, the Company has begun share repurchases in 2019 but anticipates using the majority of the program in 2020. Any repurchase of shares under the equity repurchase ~~authorization in 2018.~~

~~For further information about equity repurchases, see Part II.~~program is dependent on market conditions and other factors.

~~Other Information, Item 2.~~During the period from July 1, 2019 to July 31, 2019, the Company repurchased 0.3 million common shares for $16 with $957 of authorization remaining as of July 31, 2019.

Dividends

On ~~May 17, 2018,~~July 18, 2019, The ~~Hartford's~~Hartford’s Board of Directors declared a quarterly dividend of ~~$0.25 per common share payable on July 2, 2018 to common shareholders of record as of June 1, 2018.~~

~~On July 19, 2018, The Hartford's Board of Directors declared an increase in the quarterly dividend from $0.25 to~~ $0.30 per common share payable on October 1, ~~2018~~2019 to common ~~shareholders~~stockholders of record as of September ~~4, 2018.~~3, 2019.

On July 18, 2019, The Hartford's Board of Directors declared a dividend of $375.00 on each share of the Series G preferred stock equivalent to $0.3750 per depository share payable on August 15, 2019 to stockholders of record at the close of business on August 1, 2019.

On May 16, 2019, The Hartford’s Board of Directors declared a quarterly dividend of $0.30 per common share payable on July 1, 2019 to common stockholders of record as of June 3, 2019.

There are no current restrictions on the HFSG Holding Company's ability to pay dividends to its ~~shareholders.~~stockholders.

For a discussion of restrictions on dividends to the HFSG Holding Company from its insurance subsidiaries, see the following "Dividends from Insurance Subsidiaries" discussion. For a discussion of potential restrictions on the HFSG Holding Company's ability to pay dividends, see the risk factor "Our ability to declare and pay dividends is subject to limitations" in Item 1A of Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

Pension Plans and Other Postretirement Benefits

The Company does not have a ~~2018~~2019 required minimum funding contribution for the U.S. qualified defined benefit pension plan and the funding requirements for all pension plans are expected to be immaterial. The Company has not determined whether, and to what extent, contributions may be made to the U.S. qualified defined benefit pension plan in ~~2018.~~2019. The Company will monitor the funded status of the U.S. qualified defined benefit pension plan during ~~2018~~ 2019to make this determination.

Dividends from Insurance Subsidiaries

Dividends to the HFSG Holding Company from its insurance subsidiaries are restricted by insurance regulation. Upon the acquisition of Navigators Group, the Company’s principal insurance subsidiaries are domiciled in the United States, the United Kingdom and Belgium.

The payment of dividends by Connecticut-domiciled insurers is limited under the insurance holding company laws of Connecticut. These laws require notice to and approval by the state insurance commissioner for the declaration or payment of any dividend, which, together with other dividends or distributions made within the preceding twelve months, exceeds the greater of (i) 10% of the insurer’s statutory policyholder surplus as of December 31 of the preceding year or (ii) net income (or net gain from operations, if such company is a life insurance company) for the twelve-month period ending on the thirty-first day of December last preceding, in each case determined under

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

statutory insurance accounting principles. In addition, if any dividend of a Connecticut-domiciled insurer exceeds the insurer’s earned surplus, it requires the prior approval of the Connecticut Insurance Commissioner.

Property casualty insurers domiciled in New York, including Navigators Insurance Company ("NIC") and Navigators Specialty Insurance Company ("NSIC"), generally may not, without notice to and approval by the state insurance commissioner, pay dividends out of earned surplus in any twelve‑month period that exceeds the lesser of (i) 10% of the insurer’s statutory policyholders’ surplus as of the most recent financial statement on file, or (ii) 100% of its adjusted net investment income, as defined, for the same twelve month period. As part of the New York state insurance commissioner's approval of the Navigators Group acquisition, and as is common practice, any dividend from NIC and NSIC before May 2021 will require prior approval from the state insurance commissioner.

The insurance holding company laws of the other jurisdictions in which The Hartford’s insurance subsidiaries are incorporated (or deemed commercially domiciled) generally contain similar (although in certain instances more restrictive) limitations on the payment of dividends. In addition to statutory limitations on paying dividends, the Company also takes other items into consideration when determining dividends from subsidiaries. These considerations include, but are not limited to, expected earnings and capitalization of the subsidiaries, regulatory capital

~~Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations~~

requirements and liquidity requirements of the individual operating company.

~~For~~Corporate members of Lloyd's Syndicates may pay dividends to its parent to the extent of available profits that have been distributed from the syndicate in excess of the Funds at Lloyd's ("FAL") capital requirement. The FAL is determined based on the syndicate’s solvency capital requirement of the syndicate under the E.U.'s Solvency II capital adequacy model, plus a Lloyd’s specific economic capital assessment.

Insurers domiciled in the United Kingdom may pay dividends to its parent out of its statutory profits subject to restrictions imposed under U.K. Company law and European Insurance regulation (Solvency II). Belgium domiciled insurers may only pay dividends if, at the end of its previous fiscal year, the total amount of its assets, as reduced by its provisions and debts, are in excess of certain minimum capital thresholds calculated under Belgian law.

As of December 31, 2018, under the formulas described above, the Company’s property and casualty insurance subsidiaries in the United States and overseas are permitted to pay up to a maximum of approximately $1.3 billion in dividends to HFSG Holding Company in 2019, though only approximately $250 of this dividend capacity can be paid before the fourth quarter of 2019. Hartford Life and Accident Insurance Company ("HLA") has ~~$125 remaining~~$380 of dividend capacity for ~~property~~2019.

Through July 31, 2019, HFSG Holding Company received $237 of dividends, including $150 from HLA, $84 from Hartford Funds and ~~casualty ("P&C") insurance subsidiaries and~~$3 from a run-off HFSG subsidiary. There were no ~~dividend capacity for HLA.~~

~~During the first six months of 2018, total~~ dividends ~~paid by~~received from P&C subsidiaries to HFSG holding company were $2.1 billion. This includes an extraordinary dividend of $2.0 billion, which was comprised of a $1.9 billion principal paydown on the intercompany note owed by HHI to Hartford Fire Insurance Company related to the sale of Talcott Resolution and $92 related to interest payments on the note. In addition, there was $50 of ordinary P&C dividends that were paid to HFSG holding company, though these were subsequently contributed to a run-off P&C subsidiary. Excluding the interest payments on the intercompany note and dividends that were subsequently contributed to a P&C subsidiary, net dividends paid by P&C subsidiaries to HFSG holding company were $1.9 billion during the first six months of ~~2018.~~

~~Total net dividends received by HFSG holding company were $2.0 billion, including $1.9 billion from P&C subsidiaries and $55 from Mutual Funds during the first six months of 2018.~~2019.

Over the ~~remainder~~last five months of ~~2018,~~2019, the Company anticipates receiving approximately ~~$55~~$100 to $150 of dividends from ~~Mutual~~HLA, $16 to $41 of dividends from Hartford Funds and does not

anticipate receiving any additional dividends from P&C ~~subsidiaries or from HLA.~~subsidiaries.

Other Sources of Capital for the HFSG Holding Company

The Hartford endeavors to maintain a capital structure that provides financial and operational flexibility to its insurance subsidiaries, ratings that support its competitive position in the financial services marketplace (see the "Ratings" section below for further discussion), and ~~shareholder~~stockholder returns. As a result, the Company may from time to time raise capital from the issuance of debt, common equity, preferred stock, equity-related debt or other capital securities and is continuously evaluating strategic opportunities. The issuance of debt, common equity, equity-related debt or other capital securities could result in the dilution of ~~shareholder~~stockholder interests or reduced net income due to additional interest expense.

Shelf Registrations

The Hartford filed an automatic shelf registration statement with the Securities and Exchange Commission ("the SEC") on ~~July 29, 2016~~May 17, 2019 that permits it to offer and sell debt and equity securities during the three-year life of the registration statement.

Revolving Credit Facilities, and Commercial Paper

Revolving Credit Facilities

~~As previously reported, on March 29, 2018, the~~The Company entered into an amendment to its Five-Year Credit Agreement dated October 31, 2014. The Amendment reset the level of the Company's minimum consolidated net worth financial covenant to $9 billion excluding AOCI from its former $13.5 billion (where net worth was defined as stockholders' equity excluding AOCI and including junior subordinated debt), among other updates. Among other changes, under an amended and restated credit agreement that became effective in June 2018, after the closing

~~of the sale of the Company's life and annuity run-off business, the aggregate amount of principal of the~~has a senior unsecured five-year revolving credit facility ~~decreased from $1 billion~~(the "Credit Facility") that provides up to $750 ~~including a reduction to the amount available for letters~~million of unsecured credit ~~from $250 to $100, the maturity date was extended to March 29, 2023, and the liens covenant and certain other covenants were modified.~~

Revolving loans from the Credit Facility may be in multiple currencies. U.S. dollar loans will bear interest at a floating rate equivalent to an indexed rate depending on the type of borrowing and a basis point spread based on The Hartford's credit rating and will mature no later thanthrough March 29, 2023. Letters of credit issued from the Credit Facility bear a fee based on The Hartford's credit rating and expire no later than March 29, 2024. The Credit Facility requires the Company to maintain a minimum consolidated net worth excluding AOCI of $9.0 billion, limit the ratio of senior debt to capitalization excluding AOCI to no more than 35% and meet other customary covenants. The Credit Facility is for general corporate purposes.

As of June 30, ~~2018~~,2019, no borrowings were outstanding and $3 in letters of credit were issued under the Credit Facility and the Company was in compliance with all financial covenants.

Commercial Paper

As of June 30, ~~2018~~2019, The Hartford's maximum borrowings available under its commercial paper program ~~was $1 billion~~is $750 and there was no commercial paper outstanding. The Company is dependent upon market conditions to access short-term financing through the issuance of commercial paper to investors. On July 19, 2018, the Board of Directors revised the Company's commercial paper issuance authorization from $1 billion to $750 to align the program with the Company's $750 five year revolving credit facility which became effective on June 11, 2018.

Intercompany Liquidity Agreements

The ~~Hartford~~Company has $2.0 billion available under an intercompany liquidity agreement that allows for short-term advances of funds among the HFSG Holding Company and certain affiliates of up to $2 billion for liquidity and other general corporate purposes. The Connecticut Department of Insurance ~~Department~~ ("CTDOI") granted approval for certain affiliated insurance companies that are parties to the agreement to treat receivables from a parent, including the HFSG Holding Company, as admitted assets for statutory accounting purposes.

~~On May 25, 2018 Hartford Financial Services Group issued a Revolving Note (the "Note") in the principal amount of $165 to Hartford Fire Insurance Company. The note was repaid on June 1, 2018.~~

As of June 30, ~~2018,~~2019 there were no amounts outstanding at the HFSG Holding Company.

Collateralized Advances with Federal Home Loan Bank of Boston

The Company’s subsidiaries, Hartford Fire Insurance Company (“Hartford Fire”) and Hartford Life and Accident Insurance Company (“HLA”), are members of the Federal Home Loan Bank of Boston (“FHLBB”). Membership allows these subsidiaries access to collateralized advances, which may be short- or long-term with fixed or variable rates. Advances may be used to support general corporate purposes, which would be presented as short- or long-term debt, or to earn incremental investment

Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

income, which would be presented in other liabilities consistent with other collateralized financing transactions. As of June 30, 2019, there were no advances outstanding.

For further information regarding collateralized advances with Federal Home Loan Bank of Boston, see Note 13 - Debt of Notes to Consolidated Financial Statements included in the Company’s 2018 Form 10-K Annual Report.

Lloyd's Letter of Credit Facilities

As a result of the acquisition of Navigators Group, The Hartford assumed three existing letter of credit facility agreements: the Club Facility, the Bilateral Facility, and the Australian Dollar Facility. Letters of credit under the Club and Bilateral Facilities are used to provide a portion of the capital requirements at Lloyd's. As of June 30, 2019, uncollateralized letters of credit with an aggregate face amount of $165 and £60 million were outstanding under the Club Facility, $8 was outstanding under the Bilateral Facility, and $1 of cash collateral was posted at Lloyd's. The Bilateral Facility has unused capacity of $17 for issuance of additional letters of credit. Principally as a result of second quarter loss on reinsurance, reserve increases and other adjustments upon the acquisition, Navigators Group is not in compliance with certain financial covenants regarding tangible net worth and Funds at Lloyd’s (“FAL”) as set forth in the Club Facility and Bilateral Facility. The Company is in discussions with the participating banks to amend the covenants, and has obtained a temporary waiver. It is expected that the amount of letters of credit permitted to support Lloyd's capital requirements will be reduced by the end of 2020, which may require the Company to seek alternative means of supporting its obligations at Lloyd's, including utilizing holding company resources.

As of June 30, 2019, letters of credit with an aggregate face amount of 24 Australian Dollars were outstanding under the Australian Dollar Facility.

Derivative Commitments

~~Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations~~

positions transacted under each agreement. If the termination rights were to be exercised by the counterparties, it could impact the legal entity’s ability to conduct hedging activities by increasing the associated costs and decreasing the willingness of counterparties to transact with the legal entity. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that are in a net liability position as of June 30, ~~2018~~2019 was $7776. OfFor this $7776, the legal entities have posted collateral of $7372 in the normal course of business. Based on derivative market values as of June 30, ~~2018~~2019, a downgrade of one level below the current financial strength ~~rates~~ratings by either Moody's or S&P would not require additional assets to be posted as collateral. Based on derivative market values as of June 30, ~~2018,~~2019, a downgrade of two levels below the current financial

strength ratings by either Moody’s or S&P would require an additional $7 of assets to be posted as collateral. These collateral amounts could change as derivative market values change, as a result of changes in our hedging activities or to the extent changes in contractual terms are negotiated. The nature of the collateral that we would post, if required, would be primarily in the form of U.S. Treasury bills, U.S. Treasury notes and government agency securities.

As of June 30, ~~2018, the Company did not participate in any~~2019, no derivative ~~relationships that~~positions would be subject to an immediate termination in the event of a downgrade of one level below the current financial strength ratings. This could change as a result of changes in our hedging activities or to the extent changes in contractual terms are negotiated.

Insurance Operations

While subject to variability period to period, ~~claim frequency~~underwriting and ~~severity patterns~~investment cash flows continue to be within historical norms and, therefore, the Company’s insurance operations’ current liquidity position is considered to be sufficient to meet anticipated demands over the next twelve months. For a discussion and tabular presentation of the Company’s current contractual obligations by period, refer to Off-Balance Sheet Arrangements and Aggregate Contractual Obligations within the Capital Resources and Liquidity section of the MD&A included in The Hartford’s ~~2017~~2018 Form 10-K Annual Report.

The principal sources of operating funds are premiums, fees earned from assets under management and investment income, while investing cash flows originate from maturities and sales of invested assets. The primary uses of funds are to pay claims, claim adjustment expenses, commissions and other underwriting and insurance operating costs, to pay taxes, to purchase new investments and to make dividend payments to the HFSG Holding Company.

The Company’s insurance operations consist of property and casualty insurance products (collectively referred to as “Property & Casualty Operations”) and Group Benefits.

~~Property & Casualty Operations~~

~~Property & Casualty Operations holds~~The Company's insurance operations hold fixed maturity securities including a significant short-term investment position (securities with maturities of one year or less at the time of purchase) to meet liquidity ~~needs as shown in the table below.~~

Property & Casualty
As of June 30, 2018
Fixed maturities $ 25,440
Short-term investments 998
Cash 95
Less: Derivative collateral 65
Total $ 26,468

needs. Liquidity requirements that are unable to be funded by ~~Property & Casualty Operation’s~~the Company's insurance operations' short-term investments would be satisfied with current operating funds, including premiums or investing cash flows, which includes proceeds received through the sale of invested assets. A sale of invested assets could result in significant realized capital losses.

~~Group Benefits Operations~~

~~Group Benefits operations’ total unpaid loss and loss adjustment expense reserves of $8.4 billion are supported by $11.7 billion of~~The following tables represent the fixed maturity holdings, including the aforementioned cash and ~~invested assets, including assets~~short-term investments available to meet liquidity needs, ~~as shown below.~~for each of the Company’s insurance operations.



Property & Casualty
	As of June 30, 2019
Fixed maturities	$	30,243
Short-term investments	1,254
Cash	207
Less: Derivative collateral	58
Total	$	31,646

Group Benefits Operations
As of June 30, 2018
Fixed maturities $ 9,941
Short-term investments 401
Cash 35
Less: Derivative collateral 20
Total $ 10,357

~~Capital resources available to pay Group Benefits loss~~

Part I - Item 2. Management's Discussion and ~~loss adjustment expense reserves will be funded by Hartford Life~~Analysis of Financial Condition and ~~Accident Insurance Company.~~Results of Operations



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



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:	~~Yes~~		No

• 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.	ýYes	☒	No	☐
	¨

• whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).	ýYes	☒	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.



Large accelerated filerx	☒	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.)~~Act).	¨Yes	☐	ýNo	☒



ý☒	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


(In millions, except for share and per share data)	June 30, 2018			December 31, 2017			June 30, 2019			December 31, 2018
	(Unaudited)						(Unaudited)
Assets
Investments:
Fixed maturities, available-for-sale, at fair value (amortized cost of $35,913 and $35,612)	$	36,194		$	36,964
Fixed maturities, available-for-sale, at fair value (amortized cost of $39,429 and $35,603)							$	41,166		$	35,652
Fixed maturities, at fair value using the fair value option	36			41			49			22
Equity securities, at fair value	1,003			—			1,533			1,214
Equity securities, available-for-sale, at fair value (cost of $0 and $907)	—			1,012
Mortgage loans (net of allowances for loan losses of $1 and $1)	3,355			3,175
Mortgage loans (net of allowances for loan losses of $0 and $1)							3,612			3,704
Limited partnerships and other alternative investments	1,670			1,588			1,734			1,723
Other investments	94			96			311			192
Short-term investments	3,296			2,270			2,364			4,283
Total investments	45,648			45,146			50,769			46,790
Cash	147			180			226			112
Restricted cash							57			9
Premiums receivable and agents’ balances, net	4,001			3,910			4,726			3,995
Reinsurance recoverables, net	3,912			4,061			5,394			4,357
Deferred policy acquisition costs	662			650			722			670
Deferred income taxes, net	1,282			1,164			615			1,248
Goodwill	1,290			1,290			1,913			1,290
Property and equipment, net	1,013			1,034			1,222			1,006
Other intangible assets	669			659
Other intangible assets, net							1,191			657
Other assets	2,151			2,230			2,637			2,173
Assets held for sale	—			164,936
Total assets	$	60,775		$	225,260		$	69,472		$	62,307
Liabilities
Unpaid losses and loss adjustment expenses	$	32,080		$	32,287		$	36,104		$	33,029
Reserve for future policy benefits	668			713			644			642
Other policyholder funds and benefits payable	784			816			790			767
Unearned premiums	5,446			5,322			6,833			5,282
Short-term debt	413			320			500			413
Long-term debt	4,262			4,678			4,050			4,265
Other liabilities	4,576			5,188			5,259			4,808
Liabilities held for sale	—			162,442
Total liabilities	$	48,229		$	211,766		54,180			49,206
Commitments and Contingencies (Note 13)
Commitments and Contingencies Note (12)
Stockholders’ Equity
Common stock, $0.01 par value — 1,500,000,000 shares authorized, 384,923,222 and 384,923,222 shares issued	$	4		$	4
Preferred stock, $0.01 par value — 50,000,000 shares authorized, 13,800 shares issued at June 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 June 30, 2019 and December 31, 2018							4			4
Additional paid-in capital	4,374			4,379			4,300			4,378
Retained earnings	10,649			9,642			11,836			11,055
Treasury stock, at cost — 26,563,921 and 28,088,186 shares	(1,128		)	(1,194		)
Accumulated other comprehensive income (loss), net of tax	(1,353		)	663
Treasury stock, at cost — 23,317,797 and 25,772,238 shares							(984		)	(1,091		)
Accumulated other comprehensive loss, net of tax							(198		)	(1,579		)
Total stockholders’ equity	$	12,546		$	13,494		15,292			13,101
Total liabilities and stockholders’ equity	$	60,775		$	225,260		$	69,472		$	62,307



	Three months ended June 30, 2017 [1]			Six months ended June 30, 2017 [1]
Total Revenue	$	4,793		$	9,532
Net Income	$	(20	)	$	370



Assets and (Liabilities) Carried at Fair Value by Hierarchy Level as of June 30, 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")	$	994		$	—	$	937		$	57
Collateralized debt obligations ("CDOs")	1,089			—		930			159
Commercial mortgage-backed securities ("CMBS")	3,494			—		3,466			28
Corporate	13,349			—		12,790			559
Foreign government/government agencies	1,133			—		1,130			3
Municipal	11,142			—		11,133			9
Residential mortgage-backed securities ("RMBS")	3,207			—		2,070			1,137
U.S. Treasuries	1,786			378		1,408			—
Total fixed maturities	36,194			378		33,864			1,952
Fixed maturities, FVO	36			—		36			—
Equity securities, at fair value	1,003			892		45			66
Derivative assets
Credit derivatives	15			—		15			—
Equity derivatives	1			—		—			1
Foreign exchange derivatives	(1		)	—		(1		)	—
Total derivative assets [1]	15			—		14			1
Short-term investments	3,296			861		2,435			—
Total assets accounted for at fair value on a recurring basis	$	40,544		$	2,131	$	36,394		$	2,019
Liabilities accounted for at fair value on a recurring basis
Derivative liabilities
Credit derivatives	(5		)	—		(5		)	—
Foreign exchange derivatives	(11		)	—		(11		)	—
Interest rate derivatives	(59		)	—		(61		)	2
Total derivative liabilities [2]	(75		)	—		(77		)	2
Contingent consideration [3]	(31		)	—		—			(31		)
Total liabilities accounted for at fair value on a recurring basis	$	(106	)	$	—	$	(77	)	$	(29	)


[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.


[3]	For additional information see the Contingent Consideration section below.



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, ~~CDOs,~~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~~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~~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


[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.


[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.



Significant Unobservable Inputs for Level 3 - Derivatives
	Fair Value		Predominant Valuation Technique	Significant Unobservable Input	Minimum		Maximum		Impact of Increase in Input on Fair Value [1]
As of June 30, 2018
Interest rate swaptions [2]	$	2	Option model	Interest rate volatility	3	%	3	%	Increase
Equity Options	1		Option model	Equity volatility	16	%	24	%	Increase
As of December 31, 2017
Interest rate swaptions [2]	$	1	Option model	Interest rate volatility	2	%	2	%	Increase
Equity options	$	1	Option model	Equity volatility	18	%	22	%	Increase


[2]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 Six Months Ended June 30, 2018
					Total realized/unrealized gains (losses)
		Fair value as of January 1, 2018			Included in net income [1] [5]			Included in OCI [2]			Purchases		Settlements			Sales			Transfers into Level 3 [3]		Transfers out of Level 3 [3]			Fair value as of June 30, 2018
Assets
Fixed Maturities, AFS
	ABS	$	19		$	—		$	—		$	50	$	(3	)	$	—		$	3	$	(12	)	$	57
	CDOs	95			—			—			98		—			(4		)	—		(30		)	159
	CMBS	69			—			(1		)	25		(3		)	(8		)	—		(54		)	28
	Corporate	520			1			(8		)	131		(32		)	(31		)	15		(37		)	559
	Foreign Govt./Govt. Agencies	2			—			—			1		—			—			—		—			3
	Municipal	17			—			(1		)	—		—			—			—		(7		)	9
	RMBS	1,230			—			(7		)	170		(174		)	(1		)	—		(81		)	1,137
Total Fixed Maturities, AFS		1,952			1			(17		)	475		(212		)	(44		)	18		(221		)	1,952
Equity Securities, at fair value		76			28			1			1		—			(40		)	—		—			66
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		$	31		$	(16	)	$	477	$	(212	)	$	(86	)	$	18	$	(221	)	$	2,021
Liabilities
Contingent Consideration [6]		(29		)	(2		)	—			—		—			—			—		—			(31		)
Total Liabilities		$	(29	)	$	(2	)	$	—		$	—	$	—		$	—		$	—	$	—		$	(31	)



Fair Value Rollforwards for Financial Instruments Classified as Level 3 for the Three Months Ended June 30, 2017
					Total realized/unrealized gains (losses)
		Fair value as of March 31, 2017			Included in net income [1] [5]			Included in OCI [2]			Purchases		Settlements			Sales			Transfers into Level 3 [3]		Transfers out of Level 3 [3]			Fair value as of June 30, 2017
Assets
Fixed Maturities, AFS
	ABS	$	81		$	—		$	—		$	23	$	—		$	—		$	—	$	(41	)	$	63
	CDOs	120			—			(3		)	186		(100		)	—			—		—			203
	CMBS	72			—			—			14		(2		)	—			—		(19		)	65
	Corporate	521			—			6			33		(4		)	(20		)	—		(8		)	528
	Foreign Govt./Govt. Agencies	49			—			—			5		—			(2		)	—		(30		)	22
	Municipal	44			4			(2		)	—		—			(30		)	—		—			16
	RMBS	1,291			—			18			29		(66		)	—			—		—			1,272
Total Fixed Maturities, AFS		2,178			4			19			290		(172		)	(52		)	—		(98		)	2,169
Equity Securities, AFS		55			—			—			—		—			—			—		—			55
Derivatives, net [4]
	Equity	4			(2		)	—			—		—			—			—		—			2
	Interest rate	5			(2		)	—			—		—			—			—		—			3
	Other contracts	—			—			—			—		—			—			—		—			—
Total Derivatives, net [4]		9			(4		)	—			—		—			—			—		—			5
Total Assets		$	2,242		$	—		$	19		$	290	$	(172	)	$	(52	)	$	—	$	(98	)	$	2,229
Liabilities
Contingent Consideration [6]		(26		)	(1		)	—			—		—			—			—		—			(27		)
Total Liabilities		$	(26	)	$	(1	)	$	—		$	—	$	—		$	—		$	—	$	—		$	(27	)


[1]	Amounts in these columns are generally reported in net realized capital gains (losses). 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.


~~[5]~~	~~Includes both market and non-market impacts in deriving realized and unrealized gains (losses).~~


~~[6]~~	~~For additional information, see Note~~ 2 - ~~Business Acquisitions~~ ~~of Notes to Consolidated Financial Statements included in the Company's 2017 form 10-K Annual Report for discussion of the contingent consideration in connection with the acquisition of Lattice.~~


Changes in Unrealized Gains (Losses) Included in Net Income for Financial Instruments Classified as Level 3 Still Held at End of Period
														Changes in Unrealized Gains (Losses) for Financial Instruments Classified as Level 3 Still Held at End of Period
															Three months ended June 30,											Six months ended June 30,
		Three months ended June 30,						Six months ended June 30,							2019			2018			2019		2018			2019			2018			2019			2018
		2018 [1] [2]			2017 [1] [2]			2018 [1] [2]			2017 [1] [2]				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	Assets													Assets
Fixed Maturities, AFS	Fixed Maturities, AFS													Fixed Maturities, AFS
														Corporate	$	—		$	—		$	2	$	(7	)	$	(1	)	$	—		$	9		$	(8	)
	CMBS	$	—		$	—		$	—		$	(1	)	RMBS	—			—			—		(4		)	—			—			(1		)	(7		)
Total Fixed Maturities, AFS	Total Fixed Maturities, AFS	—			—			—			(1		)	Total Fixed Maturities, AFS	—			—			2		(11		)	(1		)	—			8			(15		)
Derivatives, net	Derivatives, net													Derivatives, net
	Equity	(1		)	(2		)	—			(2		)	Equity	(4		)	(1		)	—		—			(6		)	—			—			—
	Interest rate	—			(2		)	1			(2		)	Interest rate	—			—			—		—			(1		)	1			—			—
Total Derivatives, net	Total Derivatives, net	(1		)	(4		)	1			(4		)	Total Derivatives, net	(4		)	(1		)	—		—			(7		)	1			—			—
Total Assets	Total Assets	$	(1	)	$	(4	)	$	1		$	(5	)	Total Assets	$	(4	)	$	(1	)	$	2	$	(11	)	$	(8	)	$	1		$	8		$	(15	)
Liabilities	Liabilities													Liabilities
Contingent Consideration [3]		(4		)	(1		)	(2		)	(2		)
Contingent Consideration														Contingent Consideration	(2		)	(4		)	—		—			(6		)	(2		)	—			—
Total Liabilities	Total Liabilities	$	(4	)	$	(1	)	$	(2	)	$	(2	)	Total Liabilities	$	(2	)	$	(4	)	$	—	$	—		$	(6	)	$	(2	)	$	—		$	—


[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.


[1]	Included in long-term debt in the Condensed Consolidated Balance Sheets, except for current maturities, which are included in short-term debt.


[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 ~~in AOCI~~ as of June 30, ~~2018~~2019 and December 31, ~~2017~~2018.



Fixed maturities, AFS, by Contractual Maturity Year
	June 30, 2019				December 31, 2018
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
One year or less	$	1,094	$	1,100	$	999	$	1,002
Over one year through five years	7,164		7,332		5,786		5,791
Over five years through ten years	7,580		7,910		6,611		6,495
Over ten years	12,400		13,399		12,629		12,820
Subtotal	28,238		29,741		26,025		26,108
Mortgage-backed and asset-backed securities	11,191		11,425		9,578		9,544
Total fixed maturities, AFS	$	39,429	$	41,166	$	35,603	$	35,652

																																									Derivative Balance Sheet Presentation
	Net Derivatives										Asset Derivatives [1]				Liability Derivatives [1]						Net Derivatives										Asset Derivatives				Liability Derivatives
	Notional Amount				Fair Value																Notional Amount				Fair Value
Hedge Designation/ Derivative Type	Jun. 30, 2018		Dec. 31, 2017		Jun. 30, 2018			Dec. 31, 2017			Jun. 30, 2018		Dec. 31, 2017		Jun. 30, 2018			Dec. 31, 2017			Jun. 30, 2019		Dec. 31, 2018		Jun. 30, 2019			Dec. 31, 2018			Jun. 30, 2019		Dec. 31, 2018		Jun. 30, 2019			Dec. 31, 2018
Cash flow hedges
Interest rate swaps	$	2,120	$	2,190	$	—		$	—		$	—	$	1	$	—		$	(1	)	$	2,040	$	2,040	$	—		$	1		$	—	$	2	$	—		$	(1	)
Foreign currency swaps	153		153		(12		)	(13		)	1		—		(13		)	(13		)	220		153		(3		)	(6		)	4		2		(7		)	(8		)
Total cash flow hedges	2,273		2,343		(12		)	(13		)	1		1		(13		)	(14		)	2,260		2,193		(3		)	(5		)	4		4		(7		)	(9		)
Non-qualifying strategies
Interest rate contracts
Interest rate swaps and futures	8,849		7,986		(59		)	(83		)	5		7		(64		)	(90		)	8,338		8,451		(62		)	(62		)	3		8		(65		)	(70		)
Foreign exchange contracts
Foreign currency swaps and forwards	341		213		—			(1		)	1		—		(1		)	(1		)	389		287		(2		)	(1		)	—		—		(2		)	(1		)
Credit contracts
Credit derivatives that purchase credit protection	6		61		—			1			—		2		—			(1		)	115		6		(1		)	—			—		—		(1		)	—
Credit derivatives that assume credit risk [2]	973		823		10			3			12		3		(2		)	—
Credit derivatives that assume credit risk [1]																					514		1,102		11			3			11		8		—			(5		)
Credit derivatives in offsetting positions	51		1,046		—			2			7		11		(7		)	(9		)	35		41		—			—			6		6		(6		)	(6		)
Equity contracts
Equity index swaps and options	136		258		1			1			1		1		—			—			710		211		(3		)	4			6		5		(9		)	(1		)
Total non-qualifying strategies	10,356		10,387		(48		)	(77		)	26		24		(74		)	(101		)	10,101		10,098		(57		)	(56		)	26		27		(83		)	(83		)
Total cash flow hedges and non-qualifying strategies	$	12,629	$	12,730	$	(60	)	$	(90	)	$	27	$	25	$	(87	)	$	(115	)	$	12,361	$	12,291	$	(60	)	$	(61	)	$	30	$	31	$	(90	)	$	(92	)
Balance Sheet Location
Fixed maturities, available-for-sale	$	153	$	153	$	—		$	—		$	—	$	—	$	—		$	—		$	153	$	153	$	—		$	—		$	—	$	—	$	—		$	—
Other investments	2,022		9,957		15			10			20		16		(5		)	(6		)	1,353		9,864		11			7			12		23		(1		)	(16		)
Other liabilities	10,454		2,620		(75		)	(100		)	7		9		(82		)	(109		)	10,855		2,274		(71		)	(68		)	18		8		(89		)	(76		)
Total derivatives	$	12,629	$	12,730	$	(60	)	$	(90	)	$	27	$	25	$	(87	)	$	(115	)	$	12,361	$	12,291	$	(60	)	$	(61	)	$	30	$	31	$	(90	)	$	(92	)


[1]	~~Certain prior year amounts have been restated to conform to the current year presentation for OTC-cleared derivatives.~~