HARTFORD INSURANCE GROUP, INC. 10-Q

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (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 4 and 5 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; Part I, Item 1A, Risk Factors in The Hartford’s 2022 Form 10-K Annual Report; and 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 January 1, 2023, the Company adopted the Financial Accounting Standards Board's ("FASB") updated guidance on accounting for long duration insurance contracts, which was applied on a modified retrospective basis as of January 1, 2021. For additional information refer to Note 1 - Basis of Presentation and Significant Accounting Policies of Notes to Condensed 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. 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 51 The Hartford's Operations 57 Financial Highlights 59 Consolidated Results of Operations 60 Investment Results 63 Critical Accounting Estimates 65 Commercial Lines 69 Personal Lines 74 Property & Casualty Other Operations 78 Group Benefits 79 Hartford Funds 81 Corporate 82 Enterprise Risk Management 83 Capital Resources and Liquidity 94 Impact of New Accounting Standards 99 Throughout the MD&A, we use certain terms and abbreviations, the more commonly used are summarized in the Acronyms section. 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. 51 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Definitions of Non-GAAP and Other Measures and Ratios Assets Under Management ("AUM")- Include mutual fund and exchange-traded fund ("ETF") assets. AUM is a measure used by the Company's Hartford Funds segment because a significant portion of the segment’s revenues and expenses are based upon asset values. These revenues and expenses 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")- This is a non-GAAP per share measure that i s calculated by dividing (a) common stockholders' equity, excluding AOCI, after tax, by (b) common shares outstanding and dilutive potential common shares. 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 that excluding AOCI from the numerator is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period, primarily based on changes in interest rates. Book value per diluted share is the most directly comparable U.S. GAAP measure. 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- The Hartford uses the non-GAAP measure core earnings as an important measure of the Company’s operating performance. The Hartford believes that core earnings provides investors with a valuable measure of the performance of the Company’s ongoing businesses because it reveals trends in our insurance and financial services businesses that may be obscured by including the net effect of certain items. Therefore, the following items are excluded from core earnings: • Certain realized gains and losses - Generally realized 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 highly variable from period to period based on capital market conditions. The Hartford believes, however, that some realized 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. • Restructuring and other costs - Costs incurred as part of a restructuring plan are not a recurring operating expense of the business. • Loss on extinguishment of debt - Largely consisting of make-whole payments or tender premiums upon paying debt off before maturity, these losses are not a recurring operating expense of the business. • Gains and losses on reinsurance transactions - Gains or losses on reinsurance, such as those entered into upon sale of a business or to reinsure loss reserves, are not a recurring operating expense of the business. • Integration and other non-recurring M&A costs - These costs, including transaction costs incurred in connection with an acquired business, are incurred over a short period of time and do not represent an ongoing operating expense of the business. • Change in loss reserves upon acquisition of a business - These changes in loss reserves are excluded from core earnings because such changes could obscure the ability to compare results in periods after the acquisition to results of periods prior to the acquisition. • Deferred gain resulting from retroactive reinsurance and subsequent changes in the deferred gain - Retroactive reinsurance agreements economically transfer risk to the reinsurers and excluding the deferred gain on retroactive reinsurance and related amortization of the deferred gain from core earnings provides greater insight into the economics of the business. • Change in valuation allowance on deferred taxes related to non-core components of before tax income - These changes in valuation allowances are excluded from core earnings because they relate to non-core components of before tax income, such as tax attributes like capital loss carryforwards. • Results of discontinued operations - These results are excluded from core earnings for businesses sold or held for sale because such results could obscure the ability to compare period over period results for our ongoing businesses. In addition to the above components of net income available to common stockholders that are excluded from core earnings, preferred stock dividends declared, which are excluded from net income, are included in the determination of core earnings. Preferred stock dividends 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) and net income (loss) available to common stockholders are the most directly comparable U.S. GAAP measures to core earnings. Core earnings should not be considered as a substitute for net income (loss) or net income (loss) available to common stockholders and does not reflect the overall profitability of the Company’s business. Therefore, The Hartford believes that it is useful for investors to evaluate net income (loss), net income (loss) available to common stockholders, and core earnings when reviewing the Company’s performance. 52 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Reconciliation of Net Income to Core Earnings Three Months Ended March 31, 2023 2022 Net income $ 535 $ 443 Preferred stock dividends 5 5 Net income available to common stockholders 530 438 Adjustments to reconcile net income available to common stockholders to core earnings: Net realized losses excluded from core earnings, before tax 7 146 Restructuring and other costs, before tax — 5 Integration and other non-recurring M&A costs, before tax 2 5 Income tax benefit [1] (3) (35) Core earnings $ 536 $ 559 [1]Primarily represents the federal income tax expense (benefit) related to before tax items not included in core earnings. Core Earnings Margin- The Hartford uses the non-GAAP measure core earnings margin to evaluate, and believes it is an important measure of, the Group Benefits segment's operating performance. Core earnings margin is calculated by dividing core earnings by revenues, excluding buyouts and realized gains (losses). Net income margin, calculated by dividing net income by revenues, is the most directly comparable U.S. GAAP measure. The Company believes that core earnings margin provides investors with a valuable measure of the performance of Group Benefits because it reveals trends in the business that may be obscured by the effect of buyouts and realized gains (losses) as well as other items excluded in the calculation of core earnings. Core earnings margin should not be considered as a substitute for net income margin and does not reflect the overall profitability of Group Benefits. Therefore, the Company believes it is important for investors to evaluate both core earnings margin and net income margin when reviewing performance. 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 Services office of Verisk. For international events, the Company's approach is similar, informed, in part, by how Lloyd's of London defines major losses. 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 Commercial Lines and Personal Lines is the ratio of underwriting expenses less fee income, to earned premiums. Underwriting expenses include the amortization of deferred policy acquisition costs ("DAC") and insurance operating costs and other expenses, including certain centralized services costs and bad debt expense. DAC includes 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 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 Hartford Funds business. These fees are generally earned on a daily basis. Therefore, this fee income increases or decreases with the rise or fall in AUM whether caused by changes in the market or through net flows. Gross New Business Premium- Represents the amount of premiums charged, before ceded reinsurance, for policies issued to customers who were not insured with the Company in the previous policy term. Gross new business premium plus gross renewal written premium less ceded reinsurance equals total written premium. 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 (" ROE ") 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 53 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 rate-making process, adjust the assumption as appropriate for the particular state, product or coverage. Current Accident Year Loss and Loss Adjustment Expense Ratio Before Catastrophes- A measure of the cost of non-catastrophe 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, excluding those related to buyout premiums, 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 Fund Assets- Are owned by the shareowners of those products and not by the Company and, therefore, are not reflected in the Company’s Condensed Consolidated Financial Statements, except in instances where the Company seeds new investment products. Mutual fund and ETF assets are a measure used by the Company primarily because a significant portion of the Company’s Hartford Funds segment revenues and expenses are based upon asset values. These revenues and expenses increase or decrease with a rise or fall in AUM whether caused by changes in the market or through net flows. Net New Business Premium- Represents the amount of premiums charged, after ceded reinsurance, for policies issued to customers who were not insured with the Company in the previous policy term. Net new business premium plus renewal written premium equals total written premium. Policy Count Retention- Represents the ratio of the number of renewal policies issued during the current year period divided by the number of policies issued in the previous calendar period before considering policies cancelled subsequent to renewal. 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. Policies in Force- 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) and is affected by both new business growth and policy count retention. Policyholder Dividend Ratio- The ratio of policyholder dividends to earned premium. Premium Retention - For middle and large commercial, represents the ratio of prior period premiums that were successfully renewed divided by premiums associated with policies available for renewal in the current period. Premium retention excludes premium amounts from annual audits, renewal written price increases and changes in exposure, including amount of insurance. Premium retention statistics are subject to change from period to period based on a number of factors, including the effect of subsequent cancellations and non-renewals . 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 the 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 ("P&C") business. Since the Company earns premiums over the six to twelve month term of the policies, 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 and individual risk pricing decisions per unit of exposure on policies that renewed and includes amount of insurance. 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 impacting renewal policies as previously filed with and approved by state regulators during the period. 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 54 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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- The Company uses this non-GAAP financial measure to evaluate, and believes is an important measure of, the Hartford Funds segment’s operating performance. ROA, core earnings is calculated by dividing annualized 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 Hartford Funds segment because it reveals trends in our business that may be obscured by the effect of items excluded in the calculation of core earnings. ROA, core earnings, should not be considered as a substitute for ROA and does not reflect the overall profitability of our Hartford Funds business. Therefore, the Company believes it is important for investors to evaluate both ROA, and ROA, core earnings when reviewing the Hartford Funds segment performance. A reconciliation of ROA to ROA, core earnings is set forth in the Results of Operations section within MD&A - Hartford Funds. Underlying Combined Ratio- This non-GAAP financial measure of underwriting results represents the combined ratio before catastrophes, prior accident year development and current accident year change in loss reserves upon acquisition of a business. Combined ratio is the most directly comparable GAAP measure. The Company believes this ratio is an important measure of the trend in profitability since it removes the impact of volatile and unpredictable catastrophe losses and prior accident year loss and loss adjustment expense reserve development. The changes to loss reserves upon acquisition of a business are excluded from underlying combined ratio because such changes could obscure the ability to compare results in periods after the acquisition to results of periods prior to the acquisition as such trends are valuable to our investors' ability to assess the Company's financial performance. 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 Hartford's management evaluates profitability of the Commercial and Personal Lines segments primarily on the basis of underwriting gain or loss. Underwriting gain (loss) is a before tax non-GAAP measure that represents earned premiums less incurred losses, loss adjustment expenses and underwriting expenses. Net income (loss) is the most directly comparable GAAP measure. Underwriting gain (loss) is influenced significantly by earned premium growth and the adequacy of The Hartford's pricing. Underwriting profitability over time is also greatly influenced by The Hartford's underwriting discipline, as management strives to manage exposure to loss through favorable risk selection and diversification, effective management of claims, use of reinsurance and its ability to manage its expenses. The Hartford believes that underwriting gain (loss) provides investors with a valuable measure of profitability, before tax, derived from underwriting activities, which are managed separately from the Company's investing activities. 55 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Reconciliation of Net Income to Underwriting Gain (Loss) Three Months Ended March 31, 2023 2022 Commercial Lines Net income $ 421 $ 383 Adjustments to reconcile net income to underwriting gain: Net investment income (338) (333) Net realized gains 19 91 Other expense — 6 Income tax expense 100 95 Underwriting gain $ 202 $ 242 Personal Lines Net income (loss) $ (1) $ 77 Adjustments to reconcile net income to underwriting gain (loss): Net investment income (38) (33) Net realized gains 1 9 Net servicing and other expense (income) (6) (4) Income tax expense (benefit) (1) 20 Underwriting gain (loss) $ (45) $ 69 P&C Other Operations Net income $ 6 $ 8 Adjustments to reconcile net income to underwriting loss: Net investment income (16) (16) Net realized gains 3 4 Income tax expense 1 1 Underwriting loss $ (6) $ (3) Written and Earned Premiums- Written premium represents the amount of premiums charged for policies issued, net of reinsurance, during a fiscal period. 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. 56 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations THE HARTFORD’S OPERATIONS The Hartford 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 reserves for run-off structured settlement and terminal funding agreement liabilities, restructuring costs, capital raising activities (including equity financing, debt financing and related interest expense), transaction expenses incurred in connection with an acquisition, certain M&A costs, 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 a portion of the invested assets of Talcott Resolution Life, Inc. and its subsidiaries as well as certain of Talcott's affiliates. The Company derives its revenues principally from: (a) premiums earned for insurance coverage provided to insureds; (b) management fees on mutual fund and ETF assets; (c) net investment income; (d) fees earned for services provided to third parties; and (e) net realized gains and 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, making reliable estimates of actual mortality and morbidity, 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 and the Lloyd's Syndicate's ability to write business is subject to Lloyd's approval for its premium capacity each year. Most of Personal Lines written premium is associated with our exclusive licensing agreement with AARP, which is effective through December 31, 2032. This agreement provides an important competitive advantage given the size of the 50 plus population and the strength of the AARP brand. Similar to property and 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 an average of 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 or if investment returns are lower than expected at the time the products were sold. 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 (" LTD") , 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 of the Company’s mutual fund and ETF businesses depend largely on the amount of assets under management and the level of fees charged based, in part, on asset share class and fund type. Changes in assets under management are driven by the two main factors of net flows and the market return of the funds, which are 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 ETF shareowners. Financial results are highly correlated to the growth in assets under management since these funds 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 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 ("AFS") securities, including, among other asset classes, corporate bonds, municipal bonds, government debt, short-term debt, mortgage-backed securities, asset-backed securities and collateralized loan obligations ("CLO"). The Company also invests in commercial mortgage loans as well as limited partnerships and alternative investments, which are private investments that are less liquid, but have the potential to generate higher returns. 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 net of tax income to meet policyholder and corporate obligations. Investment strategies are developed 57 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations based on a variety of factors including business needs, regulatory requirements and tax considerations. Operational transformation and cost reduction plan In recognition of the need to become more cost efficient and competitive along with enhancing the experience we provide to agents and customers, on July 30, 2020, the Company announced an operational transformation and cost reduction plan it refers to as Hartford Next. Through reduction of its headcount, Information Technology ("IT") investments to further enhance our capabilities, and other activities, relative to 2019, the Company expects to achieve a reduction in annual insurance operating costs and other expenses of approximately $625 in 2023. To achieve those expected savings, we expect to incur approximately $386 over the course of the program, with $297 expensed cumulatively through March 31, 2023, and expected expenses of $27 over the last nine months of 2023 and $62 after 2023, with the expenses after 2023 consisting mostly of amortization of internal use software and capitalized real estate costs. Included in the estimated costs of $386, we expect to incur restructuring costs of approximately $121, including $38 of employee severance, $23 to retire certain IT applications, and $60 for consulting and lease termination expenses. Restructuring costs are reported as a charge to net income but not in core earnings. The following table presents Hartford Next program costs incurred, including restructuring costs, and expense savings relative to 2019 realized in the three months ended March 31, 2023 and expected annual costs and expense savings relative to 2019 for the full year in 2023: Hartford Next Costs and Expense Savings Three Months Ended March 31, 2023 Estimate for 2023 Employee severance $ (3) $ (3) IT costs to retire applications 1 4 Professional fees and other expenses 2 2 Estimated restructuring costs — 3 Non-capitalized IT costs 5 17 Other costs 2 7 Amortization of capitalized IT development costs [1] 2 8 Amortization of capitalized real estate [2] — 1 Estimated costs within core earnings 9 33 Total Hartford Next program costs 9 36 Cumulative savings for the period relative to 2019 (155) (625) Net expense (savings) before tax $ (146) $ (589) Net expense (savings) before tax: Accounted for within core earnings $ (146) $ (593) Restructuring costs recognized outside of core earnings — 4 Net expense (savings) before tax $ (146) $ (589) [1] Does not include approximately $45 of IT asset amortization after 2023. [2]Does not include approximately $13 of real estate amortization after 2023. 58 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations FIRST QUARTER FINANCIAL HIGHLIGHTS Net Income Available to Common Stockholders Net Income Available to Common Stockholders per Diluted Share Book Value per Diluted Share Ý Increased $92 or 21% Ý Increased $0.36 or 28% Ý Increased $2.60 or 6% + Lower net realized losses + Increase in net income available to common stockholders + An increase in common stockholders' equity largely due to a increase in AOCI, primarily driven by lower net unrealized losses on available for sale securities + In Group Benefits, lower mortality claims and the effect of higher premiums + Reduction in outstanding shares due to share repurchases + Lower interest expense on corporate debt + Net income in excess of common stockholder dividends + In Commercial Lines and Personal Lines, the effect of higher earned premiums - Dilutive effect of share repurchases - Higher P&C current accident year catastrophe losses - A higher current accident year loss ratio before catastrophes in Personal Lines - Favorable P&C prior accident year reserve development in the prior year period Investment Yield, After Tax Property & Casualty Combined Ratio Group Benefits Net Income Margin Ý Increased 10 bps Ý Increased 5.3 points Ý Increased 5.8 points + A higher yield on fixed maturity securities due to an increased yield on variable-rate securities and reinvesting at higher rates + Higher current accident year catastrophe losses + Lower mortality claims in group life + A lower group disability loss ratio due to favorable long-term disability claim incidence + Higher personal automobile loss costs, driven by severity - Lower returns on limited partnerships and other alternative investments + Favorable prior accident year reserve development in the prior year period + Higher fully insured ongoing premiums + A change to net realized gains + Higher current accident year loss ratio in workers' compensation - Higher insurance operating costs and other expenses - Lower current accident year losses in international - Lower net investment income driven by lower income from limited partnerships - A lower expense ratio driven, in part, by higher earned premium 59 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 as well as with the segment operating results sections of MD&A. Consolidated Results of Operations Three Months Ended March 31, 2023 2022 Change Earned premiums $ 5,063 $ 4,651 9 % Fee income 319 362 (12 %) Net investment income 515 509 1 % Net realized losses (7) (145) 95 % Other revenues 20 16 25 % Total revenues 5,910 5,393 10 % Benefits, losses and loss adjustment expenses 3,482 3,120 12 % Amortization of deferred policy acquisition costs 491 437 12 % Insurance operating costs and other expenses 1,216 1,210 — % Interest expense 50 62 (19 %) Amortization of other intangible assets 18 18 — % Restructuring and other costs — 5 (100 %) Total benefits, losses and expenses 5,257 4,852 8 % Income, before tax 653 541 21 % Income tax expense 118 98 20 % Net income 535 443 21 % Preferred stock dividends 5 5 — % Net income available to common stockholders $ 530 $ 438 21 % Three months ended March 31, 2023 compared to the three months ended March 31, 2022 Net income available to common stockholders increased by $92, primarily driven by: • Lower realized losses of $138, before tax, driven by a change to net gains on equity securities in the current period compared to net losses in the prior period; • In Group Benefits, an improved group life loss ratio driven by lower mortality, the effect of higher fully insured ongoing premiums, and an improved group disability loss ratio, partially offset by an increase in insurance operating costs and other expenses and lower net investment income; and • A lower level of interest expense on corporate debt. These increases were partially offset by: • A decrease in P&C underwriting results of $157, before tax, driven by higher current accident year catastrophe losses, a higher current accident year loss and loss adjustment expense ("LAE") ratio before catastrophes in Personal Lines, favorable prior accident year reserve development in the 2022 period, and higher underwriting expenses, partially offset by the effect of earned premium growth. For a discussion of the Company's operating results by segment, see MD&A - Segment Operating Summaries. 60 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations REVENUE Earned Premiums Earned premiums increased by $412, or 9%, primarily due to: • An increase in P&C reflecting an 11% increase in Commercial Lines and 3% in Personal Lines. – Contributing to the increase in Commercial Lines was the effect of earned pricing increases, an increase in small commercial and middle and large commercial new business, and the effect of higher insured exposures, principally in workers’ compensation, partially offset by lower new business in global specialty. – For Personal Lines, earned premium was up due to the effect of earned pricing increases, partially offset by non-renewals. • An increase in Group Benefits earned premium of 8% due to increases in group life, group disability, and supplemental health product premiums, primarily driven by strong new business sales and persistency as well as an increase in exposure on existing accounts. Fee income decreased, driven by lower daily average assets within Hartford Funds due to a decline in equity and fixed income market levels since the prior year period and, to a lesser extent, net outflows over the preceding twelve months. Net Investment Income Net investment income increased primarily due to the impact of a higher yield on variable-rate securities and reinvesting at higher rates, partially offset by lower income from limited partnerships and other alternative investments driven by lower returns on private equity funds and lower real estate fund valuations, in addition to income from sales of underlying real estate properties in the 2022 period. Net realized losses decreased primarily due to gains on equity securities in the 2023 period due to repositioning and appreciation in value compared to losses on equity securities in the 2022 period driven by depreciation in value. For further discussion of investment results, see MD&A - Investment Results, Net Realized Gains and MD&A - Investment Results, Net Investment Income. 61 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations BENEFITS, LOSSES AND EXPENSES Losses and LAE Incurred for P&C Benefits, losses and loss adjustment expenses increased $362 due to: • An increase in Property & Casualty of $375, which was attributable to: – An increase in P&C current accident year ("CAY") loss and loss adjustment expenses before catastrophes of $252, before tax, primarily due to the effect of higher earned premiums in Commercial Lines, higher personal automobile claim severity, and a higher loss ratio in small commercial, partially offset by lower loss ratios in global specialty and middle and large commercial. – An increase in current accident year catastrophe losses of $87, before tax. Catastrophe losses in the 2023 period included losses from winter storms along the East and West Coasts and tornado, wind and hail events across several regions of the United States. Catastrophe losses in the 2022 period included $27, net of reinsurance, related to the Ukraine conflict, as well as losses from tornado, wind and hail events in the Southeast and winter storms along the East Coast. – A decline in P&C net favorable prior accident year reserve development of $36, before tax, with no net development in the 2023 period. For the 2023 period, prior year reserve development primarily included a decrease in reserves related to workers’ compensation and package business, offset by increases in reserves for Personal Lines automobile physical damage, general liability, and uncollectible reinsurance. Prior accident year reserve development in the 2022 period was a net favorable $36, before tax, primarily driven by reserve decreases in workers' compensation, package business, and commercial property, partially offset by reserve increases in general liability and assumed reinsurance. For further discussion, see Note 9 - Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Condensed Consolidated Financial Statements. Losses and LAE Incurred for Group Benefits – Partially offsetting the P&C increase was a decline in Group Benefits of $13, before tax, primarily driven by the impact of lower mortality claims and a lower incidence in group disability, partially offset by the effect of an increase in earned premiums. Amortization of deferred policy acquisition costs increased from the prior year period driven by Commercial Lines, reflecting an increase in earned premiums across all commercial lines of business. Insurance operating costs and other expenses increased slightly due to: • Technology investments made to improve customer and broker experience and data analytics to enhance underwriting and pricing capabilities; • Higher commissions in Group Benefits; and • Higher staffing costs in Commercial Lines and Group Benefits partly in response to higher business volume. These increases were offset by: • Lower variable expenses in Hartford Funds; • Incremental savings from the Company’s Hartford Next operational transformation and cost reduction plan; and • Lower direct marketing costs in Personal Lines. Interest expense decreased primarily due to the Company redeeming $600 aggregate principal amount of junior subordinated debentures on April 15, 2022. Income tax expense increased primarily due to an increase in income before tax. For further discussion of income taxes, see Note 12 - Income Taxes of Notes to Condensed Consolidated Financial Statements. 62 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations INVESTMENT RESULTS Composition of Invested Assets March 31, 2023 December 31, 2022 Amount Percent Amount Percent Fixed maturities, AFS, at fair value $ 37,444 69.8 % $ 36,231 68.9 % Fixed maturities, at fair value using the fair value option ("FVO") 326 0.6 % 333 0.6 % Equity securities, at fair value 1,301 2.4 % 1,801 3.4 % Mortgage loans (net of allowance for credit losses ("ACL") of $36 and $36) 6,047 11.3 % 6,000 11.4 % Limited partnerships and other alternative investments 4,315 8.0 % 4,177 8.0 % Other investments [1] 174 0.3 % 159 0.3 % Short-term investments 4,060 7.6 % 3,859 7.4 % Total investments $ 53,667 100.0 % $ 52,560 100.0 % [1] Primarily consists of equity fund investments, overseas deposits, consolidated investment funds, and derivative instruments which are carried at fair value. March 31, 2023 compared to December 31, 2022 Total investments increased primarily due to an increase in fixed maturities, AFS, at fair value partially offset by a decrease in equity securities, at fair value. Fixed maturities, AFS, at fair value increased primarily due to an increase in valuations as a result of a decline in interest rates, partially offset by wider credit spreads. The increase was also due to net additions primarily within the corporate sector. Equity securities, at fair value decreased primarily due to sales. Net Investment Income Three Months Ended March 31, 2023 2022 (Before tax) Amount Yield [1] Amount Yield [1] Fixed maturities [2] $ 445 4.0 % $ 331 3.1 % Equity securities 13 2.9 % 12 2.5 % Mortgage loans 57 3.7 % 50 3.6 % Limited partnerships and other alternative investments 26 2.5 % 126 14.6 % Other [3] (2) 9 Investment expense (24) (19) Total net investment income $ 515 3.7 % $ 509 3.6 % Total net investment income excluding limited partnerships and other alternative investments $ 489 3.8 % $ 383 2.9 % [1] Yields calculated using annualized net investment income divided by the monthly average invested assets at amortized cost, as applicable, excluding derivatives book value. [2] Includes net investment income on short-term investments. [3] Primarily includes changes in fair value of certain equity fund investments and income from derivatives that qualify for hedge accounting and are used to hedge fixed maturities. Three months ended March 31, 2023 compared to the three months ended March 31, 2022 Total net investment income increased slightly due to: • Higher yield on variable-rate securities and the impact of reinvesting at higher rates; and • Partially offset by lower income from limited partnerships and other alternative investments driven by lower returns on private equity funds and lower real estate fund valuations, in addition to income from sales of underlying real estate properties in the 2022 period. Annualized net investment income yield, excluding limited partnerships and other alternative investments, was up 63 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations primarily due to a higher yield on variable-rate securities and higher reinvestment rates. Average reinvestment rate, on fixed maturities and mortgage loans, excluding certain U.S. Treasury securities, for the three months ended March 31, 2023 was 5.8% which was above the average yield of sales and maturities of 4.2% for the same period. Average reinvestment rate on fixed maturities and mortgage loans, excluding certain U.S. Treasury securities, for the three months ended March 31, 2022, was 3.3%, which was above the average yield of sales and maturities of 3.0%. For the 2023 calendar year, we expect the annualized net investment income yield, excluding limited partnerships and other alternative investments, to be above the portfolio yield earned in 2022 due to the expected higher rate environment. The estimated impact on annualized net investment income yield is subject to variability due to evolving market conditions, active portfolio management, and the level of non-routine income items, such as make-whole payments, prepayment penalties on mortgage loans and yield adjustments on prepayable securities. Net Realized Gains (Losses) Three Months Ended March 31, (Before tax) 2023 2022 Gross gains on sales of fixed maturities $ 17 $ 23 Gross losses on sales of fixed maturities (39) (95) Equity securities [1] 35 (107) Net credit losses on fixed maturities, AFS [2] (5) (12) Change in ACL on mortgage loans [3] — (2) Intent-to-sell impairments [2] — (3) Other, net [4] (15) 51 Net realized losses $ (7) $ (145) [1] The change in net unrealized gains (losses) on equity securities still held as of the end of the period and included in net realized gains (losses) were $2 and $(131) for the three months ended March 31, 2023, and 2022, respectively. [2] See Credit Losses on Fixed Maturities, AFS and Intent-to-Sell Impairments within the Investment Portfolio Risks and Risk Management section of the MD&A. [3] See ACL on Mortgage Loans within the Investment Portfolio Risks and Risk Management section of the MD&A. [4] For the three months ended March 31, 2023, and 2022 includes gains (losses) from transactional foreign currency revaluation of $(7) and $6, respectively, and gains (losses) on non-qualifying derivatives of $5 and $47, respectively. Three months ended March 31, 2023 Gross gains and losses on sales were primarily due to sales of corporate securities and tax-exempt municipals, in addition to sales of U.S. treasuries for duration and/or liquidity management. Equity securities net gains were primarily driven by repositioning and appreciation in value due to higher equity market levels. Other, net losses were primarily due to $16 on credit derivatives and $8 on FVO securities due to changes in credit spreads, as well as, $7 on transactional foreign currency revaluation. These losses were partially offset by gains of $21 on interest rate derivatives driven by changes in interest rates. Three months ended March 31, 2022 Gross gains and losses on sales were primarily due to tender activity and sales of corporate securities and tax-exempt municipals, in addition to sales of U.S. treasuries for duration and risk management. Equity securities net losses were primarily driven by mark-to-market losses due to the decline in equity market levels. Other, net gains were primarily due to $32 on interest rate derivatives driven by an increase in interest rates and $14 on the termination of commodity derivatives driven by an increase in the price of crude oil. 64 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 LTD reserves, net of reinsurance; • evaluation of goodwill for impairment; • valuation of investments and derivative instruments including evaluation of credit losses on fixed maturities, AFS and ACL on mortgage loans; and • contingencies relating to corporate litigation and regulatory matters. 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 provided are appropriate based upon the facts available upon compilation of the financial statements. 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. The Company’s critical accounting estimates are discussed in Part II, Item 7 MD&A in the Company’s 2022 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 2022 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 March 31, 2023. | PROPERTY & CASUALTY INSURANCE PRODUCT RESERVES, NET OF REINSURANCE P&C Loss and Loss Adjustment Expense Reserves, Net of Reinsurance, by Segment as of March 31, 2023 Based on the results of the quarterly reserve review process, the Company determines the appropriate reserve adjustments, if any, to record. Recorded reserve estimates represent the Company's best estimate of the ultimate settlement amount of unpaid losses and loss adjustment expenses. The Company does not use statistical loss distributions or confidence levels in the process of determining its reserve estimate and, as a result, does not disclose reserve ranges. Assumptions used in arriving at the selected actuarial indications consider a number of factors, including the immaturity of emerged claims in recent accident years, emerging trends in the recent past, and the level of volatility within each 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. 65 | Table of Contents Index to MD&A 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 Three Months Ended March 31, 2023 Commercial Lines Personal Lines Property & Casualty Other Operations Total Property & Casualty Beginning liabilities for unpaid losses and loss adjustment expenses, gross $ 28,453 $ 1,857 $ 2,773 $ 33,083 Reinsurance and other recoverables 4,574 28 1,863 6,465 Beginning liabilities for unpaid losses and loss adjustment expenses, net 23,879 1,829 910 26,618 Provision for unpaid losses and loss adjustment expenses Current accident year before catastrophes 1,564 521 — 2,085 Current accident year catastrophes 138 47 — 185 Prior accident year development (" PYD ") (23) 20 3 — Total provision for unpaid losses and loss adjustment expenses 1,679 588 3 2,270 Payments (1,359) (567) (41) (1,967) Foreign currency adjustment 8 — — 8 Ending liabilities for unpaid losses and loss adjustment expenses, net 24,207 1,850 872 26,929 Reinsurance and other recoverables 4,584 29 1,856 6,469 Ending liabilities for unpaid losses and loss adjustment expenses, gross $ 28,791 $ 1,879 $ 2,728 $ 33,398 Earned premiums and fee income $ 2,776 $ 747 Loss and loss expense paid ratio [1] 49.0 76.0 Loss and loss expense incurred ratio 60.7 79.6 Prior accident year development (pts) [2] (0.8) 2.7 [1] The “loss and loss expense paid ratio” represents the ratio of paid losses and loss adjustment expenses to earned premiums and fee income. [2] “Prior accident year development (pts)” represents the ratio of prior accident year development to earned premiums. Current Accident Year Catastrophe Losses, Net of Reinsurance Three Months Ended March 31, 2023 Commercial Lines Personal Lines Total Wind and hail $ 43 $ 33 $ 76 Winter storms 80 14 94 Catastrophes before assumed reinsurance 123 47 170 Global assumed reinsurance business [1] 15 — 15 Total catastrophe losses $ 138 $ 47 $ 185 [1] Catastrophe losses incurred on global assumed reinsurance business are not covered under the Company's aggregate property catastrophe treaty. For further information on the treaty, refer to Enterprise Risk Management — Insurance Risk section of this MD&A. 66 | Table of Contents Index to MD&A 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 March 31, 2023 Commercial Lines Personal Lines Property & Casualty Other Operations Total Property & Casualty Insurance Workers’ compensation $ (61) $ — $ — $ (61) Workers’ compensation discount accretion 11 — — 11 General liability 12 — — 12 Marine 1 — — 1 Package business (5) — — (5) Commercial property 5 — — 5 Professional liability — — — — Bond — — — — Assumed reinsurance 2 — — 2 Automobile liability — — — — Homeowners — (1) — (1) Net asbestos and environmental reserves — — — — Catastrophes — — — — Uncollectible reinsurance 5 — 3 8 Other reserve re-estimates, net [1] 7 21 — 28 Total prior accident year development $ (23) $ 20 $ 3 $ — [1] Other reserve re-estimates for the three months ended March 31, 2023 includes a $20 increase in personal automobile physical damage reserves. Rollforward of Property and Casualty Insurance Product Liabilities for Unpaid Losses and LAE for the Three Months Ended March 31, 2022 Commercial Lines Personal Lines Property & Casualty Other Operations Total Property & Casualty Insurance Beginning liabilities for unpaid losses and loss adjustment expenses, gross $ 26,906 $ 1,844 $ 2,699 $ 31,449 Reinsurance and other recoverables 4,480 37 1,564 6,081 Beginning liabilities for unpaid losses and loss adjustment expenses, net 22,426 1,807 1,135 25,368 Provision for unpaid losses and loss adjustment expenses Current accident year before catastrophes 1,395 438 — 1,833 Current accident year catastrophes 81 17 — 98 Prior accident year development (33) (3) — (36) Total provision for unpaid losses and loss adjustment expenses 1,443 452 — 1,895 Payments (1,206) (512) (88) (1,806) Foreign currency adjustment (5) — — (5) Ending liabilities for unpaid losses and loss adjustment expenses, net 22,658 1,747 1,047 25,452 Reinsurance and other recoverables 4,574 36 1,555 6,165 Ending liabilities for unpaid losses and loss adjustment expenses, gross $ 27,232 $ 1,783 $ 2,602 $ 31,617 Earned premiums and fee income $ 2,495 $ 728 Loss and loss expense paid ratio [1] 48.3 70.3 Loss and loss expense incurred ratio 58.0 62.8 Prior accident year development (pts) [2] (1.3) (0.4) [1] The “loss and loss expense paid ratio” represents the ratio of paid losses and loss adjustment expenses to earned premiums and fee income. [2] “Prior accident year development (pts)” represents the ratio of prior accident year development to earned premiums. 67 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Current Accident Year Catastrophe Losses, Net of Reinsurance Three Months Ended March 31, 2022 Commercial Lines Personal Lines Total Wind and hail $ 17 $ 12 $ 29 Winter storms 23 5 28 Ukraine conflict [1] 23 — 23 Catastrophes before assumed reinsurance 63 17 80 Global assumed reinsurance business [1] [2] 18 — 18 Total catastrophe losses $ 81 $ 17 $ 98 [1] Total catastrophe losses resulting from the Ukraine conflict were $27, net of reinsurance, for the three months ended March 31, 2022, including $4 within global assumed reinsurance. [2] Catastrophe losses incurred on global assumed reinsurance business are not covered under the Company's aggregate property catastrophe treaty. For further information on the treaty, refer to Enterprise Risk Management — Insurance Risk section of this MD&A. Unfavorable (Favorable) Prior Accident Year Development for the Three Months Ended March 31, 2022 Commercial Lines Personal Lines Property & Casualty Other Operations Total Property & Casualty Insurance Workers’ compensation $ (45) $ — $ — $ (45) Workers’ compensation discount accretion 9 — — 9 General liability 12 — — 12 Marine — — — — Package business (11) — — (11) Commercial property (15) — — (15) Professional liability — — — — Bond — — — — Assumed reinsurance 12 — — 12 Automobile liability — (5) — (5) Homeowners — — — — Net asbestos and environmental reserves — — — — Catastrophes (3) — — (3) Uncollectible reinsurance — — — — Other reserve re-estimates, net 8 2 — 10 Total prior accident year development $ (33) $ (3) $ — $ (36) For discussion of the factors contributing to unfavorable (favorable) prior accident year reserve development for both the 2023 and 2022 periods, please refer to Note 9 - Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Condensed Consolidated Financial Statements. 68 | Table of Contents Index to MD&A 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 March 31, 2023 2022 Change Written premiums $ 3,109 $ 2,809 11 % Change in unearned premium reserve 343 323 6 % Earned premiums 2,766 2,486 11 % Fee income 10 9 11 % Losses and loss adjustment expenses Current accident year before catastrophes 1,564 1,395 12 % Current accident year catastrophes [1] 138 81 70 % Prior accident year development [1] (23) (33) 30 % Total losses and loss adjustment expenses 1,679 1,443 16 % Amortization of deferred policy acquisition costs 424 371 14 % Underwriting expenses 456 425 7 % Amortization of other intangible assets 7 7 — % Dividends to policyholders 8 7 14 % Underwriting gain 202 242 (17 %) Net investment income [2] 338 333 2 % Net realized losses [2] (19) (91) 79 % Other income (expense) — (6) 100 % Income before income taxes 521 478 9 % Income tax expense [3] 100 95 5 % Net income $ 421 $ 383 10 % [1] For additional information on current accident year catastrophes and prior accident year development, see MD&A - Critical Accounting Estimates, Property and Casualty Insurance Product Reserves Development, Net of Reinsurance and Note 9 - Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Condensed Consolidated Financial Statements. [2] For discussion of consolidated investment results, see MD&A - Investment Results. [3] For discussion of income taxes, see Note 12 - Income Taxes of Notes to Condensed Consolidated Financial Statements. 69 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Premium Measures Three Months Ended March 31, 2023 2022 Small Commercial: Net new business premium $ 242 $ 186 Policy count retention 86 % 86 % Renewal written price increases 3.7 % 3.2 % Renewal earned price increases 3.9 % 3.2 % Policies in-force as of end of period (in thousands) 1,439 1,378 Middle Market [1]: Net new business premium $ 148 $ 120 Premium retention 82 % 82 % Renewal written price increases 6.6 % 5.0 % Renewal earned price increases 6.3 % 5.9 % Global Specialty: Global specialty gross new business premium [2] $ 191 $ 206 Renewal written price increases [3] 3.7 % 9.4 % Renewal earned price increases [3] 6.2 % 13.1 % [1] Except for net new business premium, metrics for middle market exclude loss sensitive and programs businesses. [2] Excludes Global Re and is before ceded reinsurance. [3] Excludes Global Re, offshore energy policies, credit and political risk insurance policies , political violence and terrorism policies, and any business under which the managing agent of our Lloyd's Syndicate delegates underwriting authority to coverholders and other third parties. Underwriting Ratios Three Months Ended March 31, 2023 2022 Change Loss and loss adjustment expense ratio Current accident year before catastrophes 56.5 56.1 0.4 Current accident year catastrophes 5.0 3.3 1.7 Prior accident year development (0.8) (1.3) 0.5 Total loss and loss adjustment expense ratio 60.7 58.0 2.7 Expense ratio 31.7 31.9 (0.2) Policyholder dividend ratio 0.3 0.3 — Combined ratio 92.7 90.3 2.4 Impact of current accident year catastrophes and prior year development (4.2) (2.0) (2.2) Underlying combined ratio 88.5 88.3 0.2 70 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Net Income Three months ended March 31, 2023 compared to the three months ended March 31, 2022 Net income for the three months ended March 31, 2023 increased primarily due to lower net realized losses, partially offset by a lower underwriting gain. For further discussion of investment results, see MD&A - Investment Results. Underwriting Gain Three months ended March 31, 2023 compared to the three months ended March 31, 2022 Underwriting gain for the three month period ended March 31, 2023 decreased driven by higher current accident year catastrophes, higher underwriting expenses, a higher current accident year loss and LAE ratio before catastrophes and lower favorable prior accident year development, partially offset by the effect of earned premium growth. Underwriting expenses increased in the three month period due to higher technology and staffing costs, partially offset by incremental savings from Hartford Next initiatives. Expense ratio decreased driven by the impact of higher earned premium and incremental savings from the Hartford Next program, partially offset by investments in technology and higher staffing costs. 71 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Earned Premiums [1]Other earned premiums of $11 and $13, for the three months ended March 31, 2022, and 2023, respectively. Written Premiums [1] Other written premiums of $12 and $13 for the three months ended March 31, 2022, and 2023, respectively, is included in the total. Three months ended March 31, 2023 compared to the three months ended March 31, 2022 Earned premiums for the three month period increased due to written premium increases over the prior 12 months, including the effect of higher insured exposures, principally in workers’ compensation from higher payrolls. Written premiums f or the three month period increased driven by growth across small commercial, middle & large commercial and global specialty. • Small commercial written premium increased driven by double-digit new business growth, renewal written price increases in all lines and higher insured exposures. Written premium grew in all lines of business, with the most significant growth in package business, workers' compensation and excess and surplus lines. • Middle & large commercial written premium increased driven by double-digit new business growth, renewal written price increases in all lines, and higher insured exposures. Written premium grew in nearly all lines across general industries, industry verticals and specialty markets. • Global specialty written premium increased driven by written price increases across almost all lines, partially offset by a decline in gross new business. Written premium growth was most significant in global reinsurance. Renewal written price increases were recognized in nearly all lines in the three month period, with moderating price increases across most lines in global specialty. • In small commercial excluding workers' compensation, renewal written price increases were higher in 2023, with high-single digit price increases in package business and automobile. Workers' compensation pricing moderated from 2022 but was slightly positive due to the effect of wage inflation largely offset by lower net rates. • In middle market, the Company recognized high single-digit price increases in most lines other than workers’ compensation, which experienced low single-digit written price increases as the effect of higher wages more than offset lower rates. • In global specialty, price increases continue to moderate and we achieved low single-digit renewal written price increases overall, with the highest increases in property, marine and casualty lines. 72 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Current Accident Year Loss and LAE Ratio before Catastrophes Three months ended March 31, 2023 compared to the three months ended March 31, 2022 Current accident year loss and LAE ratio before catastrophes increased in the three month period due to higher loss ratios in workers' compensation, and to a lesser extent, automobile and global reinsurance lines, partially offset by a lower loss ratio in global specialty international lines. The lower loss ratio in global specialty international was mostly driven by the effect on the prior year ratio of $11 before tax in reinstatement premium owed to reinsurers related to ceding Ukraine conflict losses and a large ocean marine loss from an oil spill off the coast of Peru, both of which occurred in the three months ended March 31, 2022. Catastrophes and Unfavorable (Favorable) Prior Accident Year Development Three months ended March 31, 2023 compared to the three months ended March 31, 2022 Current accident year catastrophe losses for the three months ended March 31, 2023 included losses from winter storms primarily on the East and West Coasts as well as losses from various tornado, wind and hail events in several regions of the United States. Current accident year catastrophe losses for the three months ended March 31, 2022 included losses from tornado, wind and hail events in the Southeast, winter storms along the East Coast and $27 of losses, net of reinsurance, related to the Ukraine conflict. Prior accident year development was net favorable for the three months ended March 31, 2023 and included reserve decreases for workers' compensation and package business, partially offset by reserve increases for general liability, property and uncollectible reinsurance. Prior accident year development was net favorable for 2022. Reserve development in the three months ended March 31, 2022 included reserve decreases for workers' compensation, commercial property and package business, partially offset by reserve increases for general liability and assumed reinsurance. 73 | Table of Contents Index to MD&A 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 March 31, 2023 2022 Change Written premiums $ 747 $ 707 6 % Change in unearned premium reserve 8 (13) 162 % Earned premiums 739 720 3 % Fee income 8 8 — % Losses and loss adjustment expenses Current accident year before catastrophes 521 438 19 % Current accident year catastrophes [1] 47 17 176 % Prior accident year development [1] 20 (3) NM Total losses and loss adjustment expenses 588 452 30 % Amortization of DAC 58 57 2 % Underwriting expenses 145 149 (3 %) Amortization of other intangible assets 1 1 — % Underwriting gain (loss) (45) 69 (165 %) Net investment income [2] 38 33 15 % Net realized losses [2] (1) (9) 89 % Net servicing and other income (expense) [3] 6 4 50 % Income (loss) before income taxes (2) 97 (102 %) Income tax expense (benefit) [4] (1) 20 (105 %) Net income (loss) $ (1) $ 77 (101) % [1] For additional information on current accident year catastrophes and prior accident year development, see MD&A - Critical Accounting Estimates, Property & Casualty Insurance Product Reserves, Net of Reinsurance and Note 9 - Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Condensed Consolidated Financial Statements. [2] For discussion of consolidated investment results, see MD&A - Investment Results. [3] Includes servicing revenues of $19 and $17 for the three months ended March 31, 2023 and 2022, respectively. Includes servicing expenses of $14 and $13 for the three months ended March 31, 2023 and 2022, respectively. [4] For discussion of income taxes, see Note 12 - Income Taxes of Notes to Condensed Consolidated Financial Statements. Written and Earned Premiums Three Months Ended March 31, Written Premiums 2023 2022 Change Product Line Automobile $ 529 $ 497 6 % Homeowners 218 210 4 % Total $ 747 $ 707 6 % Earned Premiums Product Line Automobile $ 509 $ 493 3 % Homeowners 230 227 1 % Total $ 739 $ 720 3 % 74 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Premium Measures Three Months Ended March 31, Premium Measures 2023 2022 Policies in-force end of period (in thousands) Automobile 1,305 1,315 Homeowners 731 765 Net new business premium Automobile $ 46 $ 58 Homeowners $ 21 $ 15 Policy count retention Automobile 85 % 84 % Homeowners 84 % 84 % Renewal written price increase Automobile 10.0 % 2.9 % Homeowners 13.9 % 8.8 % Renewal earned price increase Automobile 6.0 % 2.3 % Homeowners 11.3 % 8.4 % Underwriting Ratios Three Months Ended March 31, Underwriting Ratios 2023 2022 Change Loss and loss adjustment expense ratio Current accident year before catastrophes 70.5 60.8 9.7 Current accident year catastrophes 6.4 2.4 4.0 Prior year development 2.7 (0.4) 3.1 Total loss and loss adjustment expense ratio 79.6 62.8 16.8 Expense ratio 26.5 27.6 (1.1) Combined ratio 106.1 90.4 15.7 Impact of current accident year catastrophes and prior year development (9.1) (2.0) (7.1) Underlying combined ratio 97.0 88.5 8.5 Product Combined Ratios Three Months Ended March 31, 2023 2022 Change Automobile Combined ratio 110.2 92.8 17.4 Underlying combined ratio 105.1 93.3 11.8 Homeowners Combined ratio 96.8 85.2 11.6 Underlying combined ratio 78.9 77.4 1.5 75 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Net Income (Loss) Three months ended March 31, 2023 compared to the three months ended March 31, 2022 Net income decreased in 2023, largely driven by a change from underwriting gain to an underwriting loss, partially offset by a decrease in net realized losses and an increase in net investment income. Underwriting Gain (Loss) Three months ended March 31, 2023 compared to the three months ended March 31, 2022 Underwriting gain (loss) changed from a gain to a loss, primarily due to higher current accident year loss costs before catastrophes in automobile, a change to net unfavorable prior accident year reserve development, and an increase in current accident year catastrophe losses. Expense ratio Underwriting expenses and the expense ratio decreased in 2023 as lower direct marketing costs and incremental cost savings from the Hartford Next initiative were partially offset by higher technology and operations staffing costs. Earned Premiums Written Premiums Three months ended March 31, 2023 compared to the three months ended March 31, 2022 Earned premiums were up in 2023 due to an increase in written premium over the prior twelve months in AARP Direct, partially offset by a decline across both Agency channels due to non-renewals exceeding new business. Written premiums increased in automobile in 2023 due to the effect of written pricing increases. Written premiums increased in homeowners in 2023 primarily due to an increase in new business and the effect of written pricing increases. Renewal written pricing increases were higher for both automobile and homeowners in 2023 primarily in response to recent higher loss cost trends as well as higher insured values in homeowners. 76 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Policy count retention for automobile was higher in 2023 while, for homeowners, policy count retention was flat partly due to policyholder response to pricing increases. Policies in-force decreased slightly in 2023 for automobile, and decreased for homeowners, compared to the end of first quarter 2022 reflecting the level of new business in relation to non-renewed policies. Current Accident Year Loss and LAE Ratio before Catastrophes Three months ended March 31, 2023 compared to the three months ended March 31, 2022 Current accident year Loss and LAE ratio before catastrophes increased in both automobile and homeowners in 2023. The increase in automobile was primarily due to an increase in automobile liability and physical damage claim severity. The automobile severity increases include the inflationary effects on parts and repairs. Also impacting the change for automobile between years is a higher level of frequency in the current period due to driving continuing to return to more normalized levels, largely offset by the impact of earned pricing increases. For homeowners, the increase in the current accident year loss and LAE ratio before catastrophes was due to an increase in severity for both weather and non-weather claims and an increase in the frequency of weather claims as compared to favorable prior year experience, partially offset by earned pricing increases. Contributing to the increase in homeowners severity was the effect of higher rebuilding costs due to inflation. Current Accident Year Catastrophes and Unfavorable (Favorable) Prior Accident Year Development Three months ended March 31, 2023 compared to the three months ended March 31, 2022 Current accident year catastrophe losses increased in 2023 compared to the prior year. Current accident year catastrophe losses for 2023 included tornado, wind and hail events in several regions of the United States, as well as losses from winter storms primarily on the East and West coasts. Current accident year catastrophe losses for the 2022 period primarily included tornado, wind and hail events in the Southeast and East coast winter storms. Prior accident year development was unfavorable in the 2023 period compared to favorable development in the 2022 period. Net unfavorable prior accident year development in the 2023 period was primarily driven by automobile physical damage. Net favorable prior accident year development in the 2022 period was primarily driven by automobile liability. 77 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations | PROPERTY & CASUALTY OTHER OPERATIONS - RESULTS OF OPERATIONS Underwriting Summary Three Months Ended March 31, 2023 2022 Change Losses and loss adjustment expenses Prior accident year development [1] $ 3 $ — NM Total losses and loss adjustment expenses 3 — NM Underwriting expenses 3 3 — % Underwriting loss (6) (3) (100 %) Net investment income [2] 16 16 — % Net realized losses [2] (3) (4) 25 % Income before income taxes 7 9 (22 %) Income tax expense [3] 1 1 — % Net income $ 6 $ 8 (25 %) [1] For additional information on prior accident year development, see Note 9 - Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Condensed Consolidated Financial Statements. [2] For discussion of consolidated investment results, see MD&A - Investment Results. [3] For discussion of income taxes, see Note 12 - Income Taxes of Notes to Condensed Consolidated Financial Statements. Net income Three months ended March 31, 2023 compared to the three months ended March 31, 2022 Net income decreased in the three months ended March 31, 2023 primarily due to a higher underwriting loss, partly offset by slightly lower net realized losses. Underwriting loss increased in the three month period due to unfavorable prior accident year development in 2023 related to an increase in reserves for uncollectible reinsurance. Asbestos and environmental reserve comprehensive annual reviews will occur in the fourth quarter of 2023. For information on asbestos and environmental ("A&E") reserves, see MD&A - Critical Accounting Estimates, Asbestos and Environmental Reserves included in the Company's 2022 Form 10-K Annual Report. 78 | Table of Contents Index to MD&A 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 March 31, 2023 2022 Change Premiums and other considerations $ 1,609 $ 1,490 8 % Net investment income [1] 110 123 (11 %) Net realized gains (losses) [1] 5 (16) 131 % Total revenues 1,724 1,597 8 % Benefits, losses and loss adjustment expenses 1,210 1,223 (1 %) Amortization of DAC 9 9 — % Insurance operating costs and other expenses 380 367 4 % Amortization of other intangible assets 10 10 — % Total benefits, losses and expenses 1,609 1,609 — % Income (loss) before income taxes 115 (12) NM Income tax expense (benefit) [2] 23 (4) NM Net income (loss) $ 92 $ (8) NM [1] For discussion of consolidated investment results, see MD&A - Investment Results. [2] For discussion of income taxes, see Note 12 - Income Taxes of Notes to Condensed Consolidated Financial Statements. Premiums and Other Considerations Three Months Ended March 31, 2023 2022 Change Fully insured – ongoing premiums $ 1,557 $ 1,438 8 % Buyout premiums 1 7 (86 %) Fee income 51 45 13 % Total premiums and other considerations $ 1,609 $ 1,490 8 % Fully insured ongoing sales $ 474 $ 389 22 % Ratios, Excluding Buyouts Three Months Ended March 31, 2023 2022 Change Group disability loss ratio 70.4 % 73.2 % (2.8) Group life loss ratio 86.7 % 98.7 % (12.0) Total loss ratio 75.2 % 82.0 % (6.8) Expense ratio [1] 24.7 % 25.9 % (1.2) [1]Integration and transaction costs related to the acquisition of Aetna's U.S. group life and disability business are not included in the expense ratio. Margin Three Months Ended March 31, 2023 2022 Change Net income (loss) margin 5.3 % (0.5 %) 5.8 Adjustments to reconcile net income margin to core earnings margin: Net realized losses (gains), before tax (0.3 %) 1.0 % (1.3) Integration and other non-recurring M&A costs, before tax 0.1 % 0.1 % — Income tax expense (benefit) 0.1 % (0.2 %) 0.3 Core earnings margin 5.2 % 0.4 % 4.8 79 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Net Income (Loss) Three months ended March 31, 2023 compared to the three months ended March 31, 2022 Net income increased primarily due to a lower loss ratio, additional earnings generated by growth in fully insured ongoing premium, and a change from net realized losses in the 2022 period to net realized gains in the 2023 period, partially offset by higher insurance operating expenses and a decrease in net investment income. Insurance operating costs and other expenses w ere higher prim arily due to higher commissions driven by premium growth, higher staffing costs, and investments in technology, partially offset by incremental expense savings from Hartford Next. Fully Insured Ongoing Premiums [1]Other of $87 and $100 for the three months ended March 31, 2022 and 2023 respectively, which includes other group coverages such as retiree health insurance, critical illness, accident and hospital indemnity coverages. Three months ended March 31, 2023 compared to the three months ended March 31, 2022 Fully insured ongoing premiums increased in group disability, life and other driven by strong new business sales and persistency as well as an increase in exposure on existing accounts. Fully insured ongoing sales increased over prior year with the increase driven by group life sales. Ratios Three months ended March 31, 2023 compared to the three months ended March 31, 2022 Total loss ratio decreased 6.8 points in the first quarter of 2023 compared to the prior year period reflecting a lower group life and group disability loss ratio. The group life loss ratio decreased 12.0 points driven by a lower level of mortality compared to the prior year period. The group disability loss ratio decreased 2.8 points due to favorable long-term disability claim incidence. Expense ratio decreased 1.2 points in the three months ended March 31, 2023 driven by higher earned premiums. 80 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations | HARTFORD FUNDS - RESULTS OF OPERATIONS Operating Summary Three Months Ended March 31, 2023 2022 Change Fee income and other revenue $ 241 $ 287 (16 %) Net investment income 3 1 NM Net realized gains (losses) 5 (9) 156 % Total revenues 249 279 (11 %) Operating costs and other expenses 198 229 (14 %) Total benefits, losses and expenses 198 229 (14 %) Income before income taxes 51 50 2 % Income tax expense [1] 10 8 25 % Net income $ 41 $ 42 (2 %) Daily average Hartford Funds AUM $ 127,084 $ 150,131 (15 %) ROA [2] 12.9 11.2 15 % Adjustment to reconcile ROA to ROA, core earnings: Effect of net realized losses (gains) excluded from core earnings, before tax (1.6) 2.4 (167 %) Effect of income tax expense (benefit) 0.3 (0.3) NM ROA, core earnings [2] 11.6 13.3 (13 %) [1]For discussion of income taxes, see Note 12 - Income Taxes of Notes to Condensed Consolidated Financial Statements. [2]Represents annualized earnings divided by a daily average of assets under management, as measured in basis points. Hartford Funds Segment AUM Three Months Ended March 31, 2023 2022 Change Mutual Fund and ETF AUM - beginning of period $ 112,472 $ 142,632 (21 %) Sales - Mutual Fund 6,239 9,478 (34 %) Redemptions - Mutual Fund (7,485) (10,045) 25 % Net flows - ETF 67 143 (53 %) Net flows - Mutual Fund and ETF (1,179) (424) (178 %) Change in market value and other 4,215 (8,223) 151 % Mutual Fund and ETF AUM - end of period 115,508 133,985 (14 %) Talcott Resolution life and annuity separate account AUM [1] 11,672 14,061 (17 %) Hartford Funds AUM - end of period $ 127,180 $ 148,046 (14 %) [1]Represents AUM of the third-party life and annuity separate accounts that are still managed by the Company's Hartford Funds segment. Mutual Fund and ETF AUM by Asset Class As of March 31, 2023 2022 Change Equity - Mutual Funds $ 76,132 $ 89,282 (15) % Fixed Income - Mutual Funds 16,399 18,889 (13) % Multi-Strategy Investments - Mutual Funds [1] 19,941 22,603 (12) % Equity - ETF 1,878 2,054 (9) % Fixed Income - ETF 1,158 1,157 — % Mutual Fund and ETF AUM $ 115,508 $ 133,985 (14) % [1]Includes balanced, allocation and alternative investment products. 81 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Net Income Three months ended March 31, 2023 compared to the three months ended March 31, 2022 Net income decreased for the three month period primarily due to lower fee income net of variable expenses as a result of a decrease in daily average assets under management, partially offset by net realized gains related to investments in funds sponsored by the Company in the 2023 period compared to net realized losses in the 2022 period Hartford Funds AUM March 31, 2023 compared to March 31, 2022 Hartford Funds AUM decreased primarily due to a decrease in market values over the previous twelve months and, to a lesser extent, due to net outflows. Net outflows wer e $1.2 billion in the three months ended March 31, 2023 compared to net outflows of $0.4 billion for the three months ended March 31, 2022. | CORPORATE - RESULTS OF OPERATIONS Operating Summary Three Months Ended March 31, 2023 2022 Change Fee income [1] $ 9 $ 13 (31 %) Other revenue 1 1 — % Net investment income 10 3 NM Net realized gains (losses) 6 (16) 138 % Total revenues 26 1 NM Benefits, losses and loss adjustment expenses [2] 2 2 — % Insurance operating costs and other expenses [1] 13 13 — % Interest expense [3] 50 62 (19 %) Restructuring and other costs — 5 (100 %) Total benefits, losses and expenses 65 82 (21 %) Loss before income taxes (39) (81) 52 % Income tax benefit [4] (15) (22) 32 % Net loss (24) (59) 59 % Preferred stock dividends 5 5 — % Net loss available to common stockholders $ (29) $ (64) 55 % [1]Includes investment management fees and expenses related to managing third party business, including management of a portion of the invested assets of Talcott Resolution. [2]Includes benefits expense on life and annuity business previously underwritten by the Company. [3]For discussion of debt, see Note 13 - Debt of Notes to Consolidated Financial Statements in The Hartford's 2022 Form 10-K Annual Report. [4]For discussion of income taxes, see Note 12 - Income Taxes of Notes to Condensed Consolidated Financial Statements. 82 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Net loss available to common stockholders Three months ended March 31, 2023 compared to the three months ended March 31, 2022 Net loss available to common stockholders for the three months ended March 31, 2023 decreased primarily due to a change from net realized losses in the 2022 period to net realized gains in the 2023 period, lower interest expense, higher net investment income and lower restructuring charges, slightly offset by lower fee income. Interest expense Three months ended March 31, 2023 compared to the three months ended March 31, 2022 Interest expense decreased for the three months ended March 31, 2023, largely due to the redemption of $600 in 7.875% junior subordinated debentures in April, 2022. 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, including cybersecurity, and specific risk tolerances for natural catastrophes, terrorism and pandemic risk are described in the ERM section of the MD&A in The Hartford’s 2022 Form 10-K Annual Report. | INSURANCE RISK Insurance risk is the risk of losses of both a catastrophic and non-catastrophic nature on the P&C and Group Benefits products the Company has sold. Catastrophe insurance risk is the exposure arising from both natural catastrophes (e.g., weather, earthquakes, wildfires, pandemics) and man-made catastrophes (e.g., terrorism, cyber-attacks) that create a concentration or aggregation of loss across the Company's insurance or asset portfolios. Sources of Insurance Risk Non-catastrophe insurance risks exist within each of the Company's segments except Hartford Funds and include: • Property- Risk of loss to personal or commercial property from automobile related accidents, weather, explosions, smoke, shaking, fire, theft, vandalism, inadequate installation, faulty equipment, collisions and falling objects, and/or machinery mechanical breakdown resulting in physical damage, losses from political violence and terrorism ("PV&T") and other covered perils. • Liability- Risk of loss from automobile related accidents, uninsured and underinsured drivers, lawsuits from accidents, defective products, breach of warranty, negligent acts by professional practitioners, environmental claims, latent exposures, fraud, coercion, forgery, failure to fulfill obligations per contract surety, liability from errors and omissions, losses on credit and political risk insurance ("CPRI") coverages, losses from derivative lawsuits, and other securities actions and covered perils. 83 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations • Mortality- Risk of loss from unexpected trends in insured deaths impacting timing of payouts from group life insurance, personal or commercial automobile related accidents, and death of employees or executives during the course of employment, while on disability, or while collecting workers compensation benefits. • Morbidity- Risk of loss to an insured from illness incurred during the course of employment or illness from other covered perils. • Disability- Risk of loss incurred from personal or commercial automobile related losses, accidents arising outside of the workplace, injuries or accidents incurred during the course of employment, or from equipment, with each loss resulting in short term or long-term disability payments. • Longevity- Risk of loss from increased life expectancy trends among policyholders receiving long-term benefit payments. • Cyber Insurance - Risk of loss to property, breach of data and business interruption from various types of cyber-attacks. Catastrophe risk primarily arises in the property, automobile, workers' compensation, casualty, group life, and group disability lines of business but could also arise from other coverages such as losses under PV&T and CPRI policies. Not all insurance losses arising from catastrophe risk are categorized as catastrophe losses within the segment operating results. For example, losses arising from the COVID-19 pandemic were not categorized as catastrophe losses within either the P&C or Group Benefits segments as the pandemic was not identified as a catastrophe event by the Property Claim Service in the U.S. See the term Current Accident Year Catastrophe Ratio within the Key Performance Measures section of MD&A for an explanation of how the Company defines catastrophe losses in its financial reporting. Impact Non-catastrophe insurance risk can arise from unexpected loss experience, underpriced business and/or underestimation of loss reserves and can have significant effects on the Company’s earnings. Catastrophe insurance risk can arise from various unpredictable events and can have significant effects on the Company's earnings and may result in losses that could constrain its liquidity. Management The Company's policies and procedures for managing these risks include disciplined underwriting protocols, exposure controls, sophisticated risk-based pricing, risk modeling, risk transfer, and capital management strategies. The Company has established underwriting guidelines for both individual risks, including individual policy limits, and risks in the aggregate, including aggregate exposure limits by geographic zone and peril. The Company uses both internal and third-party models to estimate the potential loss resulting from various catastrophe events and the potential financial impact those events would have on the Company's financial position and results of operations across its businesses. The Hartford closely monitors scientific literature on climate change to help identify climate change risks impacting our business. We use data from the scientific community and other outside experts including partnerships with third-party catastrophe modeling firms to inform our risk management activities and stay abreast of potential implications of climate-related impacts that we incorporate into our risk assessment. We regularly study these climate change implications and incorporate these risks into our catastrophe risk assessment and management strategy through product pricing, underwriting and management of aggregate risk to manage implications of severe weather and climate change in our insurance portfolio. In addition, certain insurance products offered by The Hartford provide coverage for losses incurred due to cyber events and the Company has assessed and modeled how those products would respond to different events in order to manage its aggregate exposure to losses incurred under the insurance policies we sell. The Company models numerous deterministic scenarios including losses caused by malware, data breach, distributed denial of service attacks, intrusions of cloud environments and attacks of power grids. Among specific risk tolerances set by the Company, risk limits are set for natural catastrophes, terrorism risk and pandemic risk. 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. 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 utilizes various reinsurance programs to mitigate catastrophe losses including excess of loss occurrence-based treaties covering property and workers’ compensation, an aggregate property catastrophe treaty, and individual risk agreements (including facultative reinsurance) that reinsure losses from specific classes or lines of business. The aggregate property catastrophe treaty covers the aggregate losses of catastrophe events designated by the Property Claim Services office of Verisk and, for international business, net losses arising from two or more risks involved in the same loss occurrence totaling at least $500 thousand, in excess of a $750 retention. The occurrence-based property catastrophe treaty responds in excess of $150 per occurrence for all perils other than earthquakes and named hurricanes and tropical storms. For earthquakes and named hurricanes and tropical storms the occurrence based property treaty responds in excess of $350 per occurrence. The occurrence property catastrophe treaty and workers’ compensation catastrophe treaties beginning with the January 1, 2021 renewal do not cover pandemic losses, as most industry reinsurance programs exclude communicable disease. The Company has reinsurance in place to cover individual group life losses in excess of $1 per person. 84 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Primary Catastrophe Treaty Reinsurance Coverages as of March 31, 2023 [1] Portion of losses reinsured Portion of losses retained by The Hartford Per Occurrence Property Catastrophe Treaty from 1/1/2023 to 12/31/2023 [1] [2] Losses of $0 to $150 None 100% retained Losses of $150 to $350 for earthquakes and named hurricanes and tropical storms [3] None 100% retained Losses of $150 to $350 from one event other than earthquakes and named hurricanes and tropical storms [3] 60% of $200 in excess of $150 40% co-participation Losses of $350 to $500 from one event (all perils) 75% of $150 in excess of $350 25% co-participation Losses of $500 to $1.1 billion from one event [4] (all perils) 90% of $600 in excess of $500 10% co-participation Aggregate Property Catastrophe Treaty for 1/1/2023 to 12/31/2023 [5] $0 to $750 of aggregate losses None 100% retained $750 to $950 of aggregate losses 100% None Workers' Compensation Catastrophe Treaty for 1/1/2023 to 12/31/2023 Losses of $0 to $100 from one event None 100% retained Losses of $100 to $450 from one event [6] 80% of $350 in excess of $100 20% co-participation [1] These treaties do not cover the assumed reinsurance business which purchases its own retrocessional coverage. [2] In addition to the Per Occurrence Property Catastrophe Treaty, for Florida homeowners wind events, The Hartford has purchased the mandatory FHCF reinsurance for the annual period starting June 1, 2022. Retention and coverage varies by writing company. The writing company with the largest coverage under FHCF is Hartford Insurance Company of the Midwest, with coverage of $41 in per event losses in excess of a $19 retention (estimates are based on best available information at this time and are periodically updated as information is made available by Florida). [3] Named hurricanes and tropical storms are defined as any storm or storm system declared to be a hurricane or tropical storm by the US National Hurricane Center, US Weather Prediction Center, or their successor organizations (being divisions of the US National Weather Service). [4] Portions of this layer of coverage extend beyond a traditional one year term. [5] The aggregate treaty is not limited to a single event; rather, it is designed to provide reinsurance protection for the aggregate of all catastrophe events (up to $350 per event), either designated by the Property Claim Services office of Verisk or, for international business, net losses arising from two or more risks involved in the same loss occurrence totaling at least $500 thousand. All catastrophe losses, except assumed reinsurance business losses, apply toward satisfying the $750 attachment point under the aggregate treaty. [6] In addition to the limits shown, the workers' compensation reinsurance includes a non-catastrophe, industrial accident layer, providing coverage for 80% of $25 in per event losses in excess of a $25 retention. In addition to the property catastrophe reinsurance coverage described in the above table, the Company has other reinsurance agreements that cover property catastrophe losses, some of which provide for reinstatement of limits in the event of a loss with reinstatement provisions varying depending on the layer of coverage. The Per Occurrence Property Catastrophe Treaty, and Workers' Compensation Catastrophe Treaty include a provision to reinstate one limit in the event that a catastrophe loss exhausts limits on one or more layers under the treaties. 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 2027. 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 $200. Under the program, in any one calendar year, the federal government will 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 80%. The Company's estimated deductible under the program is $1.9 billion for 2023. 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 and Navigators Group Reserve Development - The Company has two adverse development covers ("ADC") reinsurance agreements in place, both of which are accounted for as retroactive reinsurance. One agreement covers substantially all A&E reserve development for 2016 and prior accident years (the “A&E ADC”) up to an aggregate limit of $1.5 billion and the other covered substantially all reserve development of Navigators Insurance Company and certain of its affiliates for 2018 and prior accident years (the “Navigators ADC”) up to an aggregate limit of $300. For more information on the A&E ADC and the Navigators ADC, see Note 1, Basis of Presentation and Significant Accounting Policies and Note 11, Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Consolidated Financial Statements, included in The Hartford's 2022 Form 10-K Annual Report. | FINANCIAL RISK Financial risks include direct and indirect risks to the Company's financial objectives from events that impact financial market conditions and the value of financial assets. Some events may 85 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations cause correlated movement in multiple risk factors. The primary sources of financial risks are the Company's 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 ("OTC") and exchange-traded derivatives with counterparties meeting the appropriate regulatory and due diligence requirements. Derivatives are utilized to achieve the following Company-approved objectives: (1) hedging risk arising from interest rate, equity market, commodity market, credit spread and issuer default, price or currency exchange rate risk or volatility; (2) managing liquidity; (3) controlling transaction costs; and (4) engaging in income generation covered call transactions and 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. Sources of Liquidity Risk Sources of liquidity risk include funding risk, company-specific liquidity risk and market liquidity risk resulting from differences in the amount and timing of sources and uses of cash as well as company-specific and general market conditions. Stressed market conditions may impact the ability to sell assets or otherwise transact business and may result in a significant loss in value of the investment portfolio. Impact Inadequate capital resources and liquidity could negatively affect the Company’s overall financial strength and its ability to generate cash flows from its businesses, borrow funds at competitive rates, and raise new capital to meet operating and growth needs. Management The Company has defined ongoing monitoring and reporting requirements to assess liquidity across the enterprise under both current and stressed market conditions. 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 liquid assets among legal entities. The Company also monitors internal and external conditions, and identifies material risk changes and emerging risks that may impact operating cash flows or liquid assets. The liquidity requirements of The Hartford Financial Services Group, Inc. ("HFSG Holding Company") have been and will continue to be met by the HFSG Holding Company's fixed maturities, short-term investments and cash, and dividends from its subsidiaries, principally from its insurance operations, as well as the issuance of common stock, debt or other capital securities and borrowings from its credit facilities as needed. The Company maintains multiple sources of contingent liquidity including a revolving credit facility, an intercompany liquidity agreement that allows for short-term advances of funds among the HFSG Holding Company and certain affiliates, and access to collateralized advances from the Federal Home Loan Bank of Boston (" FHLBB ") for certain affiliates. The Company's CFO has primary responsibility for liquidity risk. 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 Risk The 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 products. Impact A decline in creditworthiness is typically reflected as an increase in an investment’s credit spread and an associated decline in the investment's fair value, potentially resulting in recording an ACL 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, including premiums for retrospectively rated plans, reinsurance recoverable and deductible losses recoverable are also subject to credit risk based on the counterparty’s inability to pay. Management The objective of the Company’s enterprise credit risk management strategy is to identify, quantify and manage credit risk in aggregate and to limit potential losses in accordance with the Company's credit risk management policy. The Company manages its credit risk by managing aggregations of risk, holding a diversified mix of issuers and counterparties across its investment, reinsurance and insurance portfolios and limiting exposure to any specific reinsurer or counterparty. Potential credit losses can be mitigated through diversification (e.g., geographic regions, asset types, industry sectors), hedging and the use of collateral to reduce net credit exposure. The Company manages credit risk through the use of various surveillance, analyses and governance processes. The investment and reinsurance areas have formal policies and procedures for counterparty approvals and authorizations, which establish criteria defining minimum levels of creditworthiness and financial stability for eligible counterparties. Potential investments are subject to underwriting reviews and private securities are subject to 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 derivative transactions through central clearing houses that require daily variation margin; • Entering into derivative and reinsurance contracts only with strong creditworthy institutions; • Requiring collateral; and 86 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations • 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 March 31, 2023, 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 5 - Investments of Notes to Condensed Consolidated Financial Statements. 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 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. Credit exposures are generally quantified based on the prior business day’s net fair value, including income accruals, of all derivative positions transacted with a single counterparty for each separate legal entity. The notional amount of derivative contracts represents the basis upon which pay or receive amounts are calculated and are not necessarily reflective of credit risk. The Company enters into collateral arrangements in connection with its derivatives positions and collateral is pledged to or held by, or on behalf of, the Company to the extent the exposure is greater than zero, subject to minimum transfer thresholds. In accordance with industry standards and the contractual requirements, collateral is typically settled on the same business day. For the three months ended March 31, 2023, the Company incurred no losses on derivative instruments due to counterparty default. For further discussion, see the Derivative Commitments section of Note 13 - 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 may also enter 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 primarily reference investment grade single corporate issuers and indexes. For further information on credit derivatives, see Note 6 - Derivatives of Notes to Condensed Consolidated Financial Statements. Credit Risk of Business Operations The Company is subject to credit risk related to the Company's commercial business that is written with large deductible policies or retrospectively-rated plans (referred to as "loss sensitive business"). The Company’s results of operations could be adversely affected if a significant portion of such contract holders failed to reimburse the Company for the deductible amount or the retrospectively rated policyholders failed to pay additional premiums owed. While the Company attempts to manage the risks discussed above through underwriting, credit analysis, collateral requirements, provision for bad debt, and other oversight mechanisms, the Company’s efforts may not be successful. 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 Risk The Company has exposure to interest rate risk arising from investments in fixed maturities and commercial mortgage loans, issuances by the Company of debt securities, preferred stock and similar securities, discount rate assumptions associated with the Company’s claim reserves and pension and other postretirement benefit obligations, and assets that support the Company's pension and other postretirement benefit plans. Impact Changes in interest rates from current levels can have both favorable and unfavorable effects for the Company. Management The Company manages its exposure to interest rate risk by constructing investment portfolios that seek to protect the Company 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. 87 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The Company primarily utilizes interest rate swaps and, to a lesser extent, futures to mitigate interest rate risk associated with its investment portfolio or liabilities and to manage portfolio duration. Equity Risk Equity risk is the risk of financial loss due to changes in the value of global equities or equity indices. Sources of Equity Risk The Company has exposure to equity risk from invested assets, assets that support the Company’s pension and other postretirement benefit plans, and fee income derived from Hartford Funds assets under management. Impact The investment portfolio is exposed to losses from market declines affecting equity securities and derivatives, which could negatively impact the Company's reported earnings. In addition, investments in limited partnerships and other alternative investments generally have a level of correlation to domestic equity market levels and can expose the Company to losses in earnings if valuations decline; however, earnings impacts are recognized on a lag as results from private equity investments and other funds are generally reported on a three-month delay. For assets supporting pension and other postretirement 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 average daily assets under management and the amount of fee income generated from those assets. Increases in equity markets will generally have the inverse impact. Management The 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, at times, hedging of changes in equity indices. For assets supporting pension and other postretirement benefit plans, the asset allocation mix is reviewed on a periodic basis. In order to minimize 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. Sources of Currency Risk The Company has foreign currency exchange risk in non-U.S. dollar denominated cash, fixed maturities, equities, and derivative instruments. In addition, the Company has non-U.S. subsidiaries, some with functional currencies other than U.S. dollar, and which transact business in multiple currencies resulting in assets and liabilities denominated in foreign currencies. Impact Changes in relative values between currencies can create variability in cash flows and realized or unrealized gains and losses on changes in the fair value of assets and liabilities. Management The Company manages its foreign currency exchange risk primarily through asset-liability matching and through the use of derivative instruments. However, legal entity capital is invested in local currencies in order to satisfy regulatory requirements and to support local insurance operations. The 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 foreign currency swaps and forwards. 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, and Fitch. If no rating is available from a rating agency, then an internally developed rating is used. Accrued interest receivable related to fixed maturities are recorded in other assets on the Condensed Consolidated Balance Sheets and are not included in the amortized cost or fair value of the fixed maturities. For further information refer to Note 5 - Investments of Notes to Condensed Consolidated Financial Statements. Fixed Maturities, AFS by Credit Quality March 31, 2023 December 31, 2022 Amortized Cost Fair Value Percent of Total Fair Value Amortized Cost Fair Value Percent of Total Fair Value United States Government/Government agencies $ 5,346 $ 4,904 13.1 % $ 5,573 $ 5,025 13.9 % AAA 6,338 6,047 16.1 % 6,171 5,824 16.1 % AA 7,226 6,879 18.4 % 7,136 6,650 18.4 % A 9,857 9,275 24.8 % 9,758 8,968 24.7 % BBB 9,315 8,559 22.9 % 8,918 7,973 22.0 % BB & below 1,936 1,780 4.7 % 1,977 1,791 4.9 % Total fixed maturities, AFS $ 40,018 $ 37,444 100.0 % $ 39,533 $ 36,231 100.0 % The fair value of fixed maturities, AFS increased as compared to December 31, 2022, primarily due to an increase in valuations as a result of a decline in interest rates, partially offset by wider credit spreads. The increase was also due to net additions primarily within the corporate sector. Fixed maturities, FVO are not included in the preceding table. For further discussion on FVO securities, see Note 4 - Fair Value Measurements of Notes to Condensed Consolidated Financial Statements. 88 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Fixed Maturities, AFS by Type March 31, 2023 December 31, 2022 Amortized Cost ACL Gross Unrealized Gains Gross Unrealized Losses Fair Value Percent of Total Fair Value Amortized Cost ACL Gross Unrealized Gains Gross Unrealized Losses Fair Value Percent of Total Fair Value Asset backed securities ("ABS") Consumer loans $ 1,649 $ — $ 2 $ (34) $ 1,617 4.3 % $ 1,538 $ — $ — $ (41) $ 1,497 4.1 % Other 584 — 3 (23) 564 1.5 % 478 — — (34) 444 1.3 % CLO 3,089 — 3 (79) 3,013 8.0 % 3,040 — 3 (102) 2,941 8.1 % Commercial Mortgage-Backed Securities ("CMBS") Agency [1] 1,265 (11) 14 (107) 1,161 3.1 % 1,268 (10) 14 (115) 1,157 3.2 % Bonds 2,218 — 1 (221) 1,998 5.3 % 2,263 — 2 (228) 2,037 5.6 % Interest only 178 — 5 (13) 170 0.5 % 184 — 5 (15) 174 0.5 % Corporate Basic industry 957 — 4 (51) 910 2.4 % 797 — 1 (64) 734 2.0 % Capital goods 1,358 — 5 (85) 1,278 3.4 % 1,380 — 2 (117) 1,265 3.5 % Consumer cyclical 1,157 — 3 (74) 1,086 2.9 % 1,100 — — (97) 1,003 2.8 % Consumer non-cyclical 2,193 — 13 (148) 2,058 5.5 % 2,102 — 6 (188) 1,920 5.3 % Energy 1,128 — 4 (68) 1,064 2.9 % 1,076 — 3 (92) 987 2.7 % Financial services 5,128 — 13 (378) 4,763 12.7 % 4,923 — 8 (441) 4,490 12.4 % Tech./comm. 2,377 (6) 16 (185) 2,202 5.9 % 2,312 (2) 9 (249) 2,070 5.7 % Transportation 702 — 1 (66) 637 1.7 % 731 — 1 (81) 651 1.8 % Utilities 1,965 — 10 (174) 1,801 4.8 % 1,871 — 3 (212) 1,662 4.6 % Other 459 — — (48) 411 1.1 % 502 — — (51) 451 1.2 % Foreign govt./govt. agencies 588 — 1 (40) 549 1.5 % 596 — — (49) 547 1.5 % Municipal bonds Taxable 1,076 — 2 (118) 960 2.6 % 1,062 — 2 (148) 916 2.5 % Tax-exempt 5,540 — 117 (252) 5,405 14.4 % 5,656 — 91 (367) 5,380 14.9 % Residential Mortgage-Backed Securities ("RMBS") Agency 1,843 — 4 (164) 1,683 4.5 % 1,865 — 2 (196) 1,671 4.6 % Non-agency 2,262 — 1 (273) 1,990 5.3 % 2,277 — — (312) 1,965 5.4 % Sub-prime 64 — — — 64 0.2 % 72 — — — 72 0.2 % U.S. Treasuries 2,238 — 2 (180) 2,060 5.5 % 2,440 — — (243) 2,197 6.1 % Total fixed maturities, AFS $ 40,018 $ (17) $ 224 $ (2,781) $ 37,444 100.0 % $ 39,533 $ (12) $ 152 $ (3,442) $ 36,231 100.0 % Fixed maturities, FVO $ 326 $ 333 [1] Includes securities with pools of loans issued by the Small Business Administration which are backed by the full faith and credit of the U.S. government. The fair value of fixed maturities, AFS increased as compared with December 31, 2022, primarily due to an increase in valuations as a result of a decline in interest rates, partially offset by wider credit spreads. The increase was also due to net additions primarily within the corporate sector. The Company primarily increased holdings of financial services and basic industry corporate bonds, and consumer loans while primarily decreasing holdings of U.S. treasuries and tax-exempt municipal bonds. 89 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Commercial & Residential Real Estate The following table presents the Company’s exposure to CMBS and RMBS by credit quality included in the preceding Fixed Maturities, AFS by Type table. Exposure to CMBS & RMBS Bonds as of March 31, 2023 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] $ 1,261 $ 1,158 $ 4 $ 3 $ — $ — $ — $ — $ — $ — $ 1,265 $ 1,161 Bonds 872 808 558 499 411 361 136 112 241 218 2,218 1,998 Interest Only 100 96 70 67 — — 8 7 — — 178 170 Total CMBS 2,233 2,062 632 569 411 361 144 119 241 218 3,661 3,329 RMBS Agency 1,823 1,664 20 19 — — — — — — 1,843 1,683 Non-Agency 1,216 1,085 436 387 368 309 227 198 15 11 2,262 1,990 Sub-Prime 2 2 18 18 10 10 9 9 25 25 64 64 Total RMBS 3,041 2,751 474 424 378 319 236 207 40 36 4,169 3,737 Total CMBS & RMBS $ 5,274 $ 4,813 $ 1,106 $ 993 $ 789 $ 680 $ 380 $ 326 $ 281 $ 254 $ 7,830 $ 7,066 Exposure to CMBS & RMBS Bonds as of December 31, 2022 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] $ 1,264 $ 1,154 $ 4 $ 3 $ — $ — $ — $ — $ — $ — $ 1,268 $ 1,157 Bonds 908 840 568 504 424 370 138 116 225 207 2,263 2,037 Interest Only 101 96 74 70 — — 8 7 1 1 184 174 Total CMBS 2,273 2,090 646 577 424 370 146 123 226 208 3,715 3,368 RMBS Agency 1,845 1,652 20 19 — — — — — — 1,865 1,671 Non-Agency 1,166 1,036 501 428 353 288 236 198 21 15 2,277 1,965 Sub-Prime 3 3 21 21 10 10 9 9 29 29 72 72 Total RMBS 3,014 2,691 542 468 363 298 245 207 50 44 4,214 3,708 Total CMBS & RMBS $ 5,287 $ 4,781 $ 1,188 $ 1,045 $ 787 $ 668 $ 391 $ 330 $ 276 $ 252 $ 7,929 $ 7,076 [1] Includes securities with pools of loans issued by the Small Business Administration which are backed by the full faith and credit of the U.S. government. The Company also has exposure to commercial mortgage loans. These loans are collateralized by real estate properties that are diversified both geographically throughout the United States and by property type. These commercial loans are originated by the Company as high quality whole loans, and the Company may sell participation interests in one or more loans to third parties. A loan participation interest represents a pro-rata share in interest and principal payments generated by the participated loan, and the relationship between the Company as loan originator, lead participant and servicer and the third party as a participant are governed by a participation agreement. As of March 31, 2023, mortgage loans had an amortized cost of $6.1 billion and carrying value of $6.0 billion, with an ACL of $36. As of December 31, 2022, mortgage loans had an amortized cost of $6.0 billion and carrying value of $6.0 billion, with an ACL of $36. There was no change to the ACL on mortgage loans which currently incorporates a level of economic uncertainty and the potential impact it might have on real estate property valuations. 90 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The Company funded $128 of commercial mortgage loans with a weighted average loan-to-value (“ LTV ”) ratio of 58% and a weighted average yield of 7.1% during the three months ended March 31, 2023. The Company continues to originate commercial mortgage loans in high growth markets across the country focusing primarily on institutional-quality industrial and multi-family properties with strong LTV ratios. There were no mortgage loans held for sale as of March 31, 2023, or December 31, 2022. 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. Available For Sale Investments in Municipal Bonds March 31, 2023 December 31, 2022 Amortized Cost Fair Value Weighted Average Credit Quality Amortized Cost Fair Value Weighted Average Credit Quality General Obligation $ 831 $ 827 AA+ $ 863 $ 838 AA Pre-refunded [1] 219 226 AAA 235 242 AAA Revenue Transportation 1,420 1,373 A+ 1,435 1,342 A+ Health Care 1,040 951 A+ 1,132 1,012 A+ Leasing [2] 714 675 AA 714 659 AA- Education 595 579 AA 601 572 AA Water & Sewer 423 404 AA 411 384 AA Power 314 308 A 280 268 A Sales Tax 266 267 AA 304 295 AA Housing 90 81 AA- 73 62 AA- Other 704 674 A+ 670 622 A+ Total Revenue 5,566 5,312 AA- 5,620 5,216 AA- Total Municipal $ 6,616 $ 6,365 AA- $ 6,718 $ 6,296 AA- [1] Pre-refunded bonds are bonds for which an irrevocable trust containing sufficient U.S. treasury, agency, or other securities has been established to fund the remaining payments of principal and interest. [2] Leasing revenue bonds are generally the obligations of a financing authority established by the municipality that leases facilities back to a municipality. The notes are typically secured by lease payments made by the municipality that is leasing the facilities financed by the issue. Lease payments may be subject to annual appropriation by the municipality, or the municipality may be obligated to appropriate general tax revenues to make lease payments. As of both March 31, 2023 and December 31, 2022, the largest issuer concentrations were the New York City Transitional Finance Authority, the Grand Parkway Transportation Corporation of Texas, and the New York City Municipal Water Finance Authority, 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 12% of the fair value of the Company's investment portfolio. Limited Partnerships and Other Alternative Investments The following table presents the Company’s investments in limited partnerships and other alternative investments which include real estate joint ventures, real estate funds, private equity funds, other funds, and other alternative investments. 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 and strong owner sponsorship, as well as limited exposure to public markets. Income or losses on investments in limited partnerships and other alternative investments are recognized on a lag as results from private equity investments and other funds are generally reported on a three-month delay. 91 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Limited Partnerships and Other Alternative Investments - Net Investment Income Three Months Ended March 31, 2023 2022 Amount Yield [1] Amount Yield [1] Real estate joint ventures and funds $ (16) (3.6 %) $ 51 14.7 % Private equity funds 36 9.2 % 68 21.4 % Other funds — — % 8 11.0 % Other alternative investments [2] 6 5.0 % (1) (0.7 %) Total $ 26 2.5 % $ 126 14.6 % [1]Yields calculated using annualized net investment income divided by the monthly average invested assets. [2]Consists of an insurer-owned life insurance policy which is primarily invested in private equity, fixed income, and hedge funds. Investments in Limited Partnerships and Other Alternative Investments March 31, 2023 December 31, 2022 Amount Percent Amount Percent Real estate joint ventures and funds $ 1,781 41.3 % $ 1,713 41.0 % Private equity funds 1,614 37.4 % 1,565 37.5 % Other funds 428 9.9 % 413 9.9 % Other alternative investments [1] 492 11.4 % 486 11.6 % Total $ 4,315 100.0 % $ 4,177 100.0 % [1]Consists of an insurer-owned life insurance policy which is primarily invested in private equity, fixed income, and hedge funds. Fixed Maturities, AFS — Unrealized Loss Aging The total gross unrealized losses were $2.8 billion as of March 31, 2023, and have decreased $661 million from December 31, 2022, primarily due to an increase in valuations as a result of a decline in interest rates, partially offset by wider credit spreads. As of March 31, 2023, $2.3 billion of the gross unrealized losses were associated with fixed maturities, AFS depressed less than 20% of amortized cost. The remaining $510 million of gross unrealized losses were associated with fixed maturities, AFS depressed greater than 20%. The fixed maturities, AFS depressed more than 20% primarily related to corporate fixed maturities, RMBS, and municipal bonds that are mainly depressed because current interest rates are higher and/or market spreads are wider than at the respective purchase dates. As part of the Company’s ongoing investment monitoring process, the Company has reviewed its fixed maturities, AFS in an unrealized loss position and concluded that these fixed maturities are temporarily depressed and are expected to recover in value as the investments approach maturity or as market spreads tighten. For these fixed maturities in an unrealized loss position where an ACL has not been recorded, the Company’s best estimate of expected future cash flows are sufficient to recover the amortized cost basis of the investment. Furthermore, the Company neither has an intention to sell nor does it expect to be required to sell these investments. For further information regarding the Company’s ACL analysis, see the Credit Losses on Fixed Maturities, AFS and Intent-to-Sell Impairments section below. Unrealized Loss Aging for Fixed Maturities, AFS Securities March 31, 2023 December 31, 2022 Consecutive Months Items Amortized Cost ACL Unrealized Loss Fair Value Items Amortized Cost ACL Unrealized Loss Fair Value Three months or less 272 $ 1,802 $ — $ (32) $ 1,770 200 $ 786 $ — $ (15) $ 771 Greater than three to six months 56 127 — (5) 122 809 6,175 — (234) 5,941 Greater than six to nine months 599 4,554 — (122) 4,432 1,024 7,598 — (561) 7,037 Greater than nine to eleven months 944 6,860 — (405) 6,455 1,859 12,994 (6) (1,510) 11,478 Twelve months or more 2,694 20,597 (17) (2,217) 18,363 1,044 8,218 (6) (1,122) 7,090 Total 4,565 $ 33,940 $ (17) $ (2,781) $ 31,142 4,936 $ 35,771 $ (12) $ (3,442) $ 32,317 92 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Unrealized Loss Aging for Fixed Maturities, AFS Continuously Depressed Over 20% March 31, 2023 December 31, 2022 Consecutive Months Items Amortized Cost ACL Unrealized Loss Fair Value Items Amortized Cost ACL Unrealized Loss Fair Value Three months or less 64 $ 457 $ (3) $ (100) $ 354 98 $ 543 $ — $ (116) $ 427 Greater than three to six months 11 55 (1) (13) 41 215 2,021 — (490) 1,531 Greater than six to nine months 88 761 (2) (186) 573 89 791 — (253) 538 Greater than nine to eleven months 80 701 — (198) 503 7 34 (2) (14) 18 Twelve months or more 22 37 (3) (13) 21 17 5 (1) (2) 2 Total 265 $ 2,011 $ (9) $ (510) $ 1,492 426 $ 3,394 $ (3) $ (875) $ 2,516 Credit Losses on Fixed Maturities, AFS and Intent-to-Sell Impairments Three months ended March 31, 2023 The Company recorded net credit losses of $5, primarily attributable to new expected credit losses of $4 on a below investment grade corporate wirelines issuer and $1 related to a CMBS that had an ACL in the prior period driven by prepayments. Unrealized losses on securities with an ACL recognized in other comprehensive income were $4. For further information, refer to Note 5 - Investments of Notes to Condensed Consolidated Financial Statements. There were no intent-to-sell impairments. 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. Future intent-to-sell impairments or credit losses may develop as the result of changes in our intent to sell specific securities that are in an unrealized loss position or if modeling assumptions, such as macroeconomic factors or security specific developments, change unfavorably from our current modeling assumptions, resulting in lower cash flow expectations. Three months ended March 31, 2022 The Company recorded a net increase in the ACL of $12. The increase was primarily attributable to new expected credit losses on four issuers with Russian exposure. Unrealized losses on securities with an ACL recognized in other comprehensive income were less than $1. Intent-to-sell impairments of $3 were related to one corporate issuer in the financial services sector. ACL on Mortgage Loans Three months ended March 31, 2023 The Company reviews mortgage loans on a quarterly basis to estimate the ACL with changes in the ACL recorded in net realized gains and losses. Apart from an ACL recorded on individual mortgage loans where the borrower is experiencing financial difficulties, the Company records an ACL on the pool of mortgage loans based on lifetime expected credit losses. For further information, refer to Note 5 - Investments of Notes to Condensed Consolidated Financial Statements. There was no change to the ACL on mortgage loans which currently incorporates a level of economic uncertainty and the potential impact it might have on real estate property valuations. The Company did not record an ACL on any individual mortgage loans. Three months ended March 31, 2022 The Company recorded an increase in the ACL on mortgage loans of $2, primarily driven by net additions of new loans. The Company did not record an ACL on any individual mortgage loans. 93 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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. | SUMMARY OF CAPITAL RESOURCES AND LIQUIDITY Capital available to the holding company as of March 31, 2023: • Approximately $800 in fixed maturities, short-term investments, investment sales receivable and cash at The HFSG Holding Company; • A senior unsecured revolving credit facility that provides for borrowing capacity up to $750 of unsecured credit through October 27, 2026. As of March 31, 2023, there were no borrowings outstanding; and • 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. As of March 31, 2023, $1.9 billion was available, $100 was outstanding between certain affiliates and there were no amounts outstanding at the HFSG holding company. Dividends and other sources of capital for the three months ended March 31, 2023: The future payment of dividends from our subsidiaries is dependent on several factors including the business results, capital position and liquidity of our subsidiaries. • P&C - HFSG Holding Company received $193 of net dividends from the Company's U.S. property and casualty insurance subsidiaries through March 31, 2023; • Group Benefits - HFSG Holding Company received $150 in dividends from Hartford Life and Accident Insurance Company (" HLA ") through March 31, 2023; and • Hartford Funds - HFSG Holding Company received $30 in dividends from Hartford Funds through March 31, 2023. Expected liquidity requirements for the next twelve months as of March 31, 2023: • $194 of interest on debt, including, for the 3-month London Inter-Bank Offered Rate ("LIBOR") plus 2.125% Notes due 2067, interest at a rate of 4.39% given the 10-year interest rate swap agreement the Company entered into in April 2017; • $21 dividends on preferred stock, subject to the discretion of the Board of Directors; and • $535 of common stockholders' dividends, subject to the discretion of the Board of Directors and before share repurchases. Expected liquidity requirements for beyond the next twelve months as of March 31, 2023: • Interest on debt and debt repayments, see Note 13 - Debt of Notes to Consolidated Financial Statements in The Hartford's 2022 Form 10-K Annual Report; and • Preferred stock and common stock dividends, subject to the discretion of the Board of Directors. Equity repurchase program: During the three months ended March 31, 2023, the Company repurchased 4.7 million common shares for $350 under the $3.0 billion share repurchase program authorized by the Board of Directors, effective through December 31, 2024. As of March 31, 2023, the Company has $2.4 billion remaining for equity repurchases under the share repurchase program. During the period April 1, 2023 through April 26, 2023, the Company repurchased approximately 1.6 million common shares for $112. The timing of any repurchases is dependent on several factors, including the market price of the Company's securities, the Company's capital position, consideration of the effect of any repurchases on the Company's financial strength or credit ratings, the Company's blackout periods, and other considerations. | LIQUIDITY REQUIREMENTS AND SOURCES OF CAPITAL The Hartford Financial Services Group, Inc. (" HFSG Holding Company") The liquidity requirements of the holding company of The Hartford Financial Services Group, Inc. will primarily be met by HFSG Holding Company's fixed maturities; short-term investments and cash; and dividends from its subsidiaries, principally its insurance operations . The Company maintains sufficient liquidity and has a variety of contingent liquidity resources to manage liquidity across a range of economic scenarios. The HFSG Holding Company expects to continue to receive dividends from its operating subsidiaries in the future and manages capital in its operating subsidiaries to be sufficient under significant economic stress scenarios. Dividends from subsidiaries and other sources of funds at the holding company 94 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations may be used to repurchase shares under the authorized share repurchase program at the discretion of management. Under significant economic stress scenarios, the Company has the ability to meet short-term cash requirements, if needed, by borrowing under its revolving credit facility or by having its insurance subsidiaries take collateralized advances under a facility with the FHLBB. The Company could also choose to have its insurance subsidiaries sell certain highly liquid, high quality fixed maturities or the Company could issue debt in the public markets under its shelf registration. | DIVIDENDS The Hartford's Board of Directors declared the following quarterly dividends since January 1, 2023: Common Stock Dividends Declared Record Payable Amount per share February 22, 2023 March 6, 2023 April 4, 2023 $ 0.425 Preferred Stock Dividends Declared Record Payable Amount per share February 22, 2023 May 1, 2023 May 15, 2023 $ 375.00 There are no current restrictions on the HFSG Holding Company's ability to pay dividends to its stockholders. For a discussion of restrictions on dividends to the HFSG Holding Company from its insurance subsidiaries, see the following "Dividends from 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, 2022. | DIVIDENDS FROM SUBSIDIARIES Dividends to HFSG Holding Company from its insurance subsidiaries are restricted by insurance regulation. For a discussion of restrictions on dividends to HFSG Holding Company from its insurance subsidiaries see Part II, Item 7, MD&A – Capital Resources and Liquidity - Dividends from Subsidiaries in The Hartford’s 2022 Form 10-K Annual Report. Through the first three months of 2023, HFSG Holding Company received $373 of net dividends from its subsidiaries, including $150 from HLA, $30 from Hartford Funds and $193 from its U.S. P&C subsidiaries, excluding $12 of P&C dividends related to interest payments on an intercompany note owed by Hartford Holdings, Inc. ("HHI") to Hartford Fire Insurance Company. | 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 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 stockholder interests or reduced net income to common stockholders due to additional interest expense or preferred stock dividends. Shelf Registrations The Hartford filed an automatic shelf registration statement with the Securities and Exchange Commission ("the SEC") on February 22, 2022 that permits it to offer and sell debt and equity securities during the three-year life of the registration statement. For further information regarding shelf registrations, Note 13 - Debt of Notes to Consolidated Financial Statements included in the Company’s 2022 Form 10-K Annual Report. Revolving Credit Facility The Hartford has a senior unsecured revolving credit facility (the "Credit Facility") that provides up to $750 of unsecured credit through October 27, 2026. As of March 31, 2023, no borrowings were outstanding and no letters of credit were issued under the Credit Facility and The Hartford was in compliance with all financial covenants. For further information regarding the Credit Facility, see Note 13 - Debt of Notes to Consolidated Financial Statements included in the Company’s 2022 Form 10-K Annual Report. Intercompany Liquidity Agreements The 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 $2.0 billion for liquidity and other general corporate purposes. The Connecticut Department of Insurance ("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. As of March 31, 2023, $1.9 billion was available, $100 was outstanding between certain affiliates and 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 HLA, are members of the 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 95 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations long-term debt, or to earn incremental investment income, which would be presented in other liabilities consistent with other collateralized financing transactions. As of March 31, 2023, there were no advances outstanding. For further information regarding collateralized advances with FHLBB, see Note 13 - Debt of Notes to Consolidated Financial Statements included in the Company’s 2022 Form 10-K Annual Report. Lloyd's Letter of Credit Facilities The Hartford has entered into a committed credit facility agreement with a syndicate of lenders (the "Club Facility"). The Club Facility has two tranches with one tranche extending a $74 commitment and the other tranche extending a £79 million ($98 as of March 31, 2023) commitment. As of March 31, 2023, letters of credit with aggregate face amounts of $74 and £79 million ($98), respectively, were outstanding under the Club Facility. Among other covenants, the Club Facility contains financial covenants regarding The Hartford's consolidated net worth and financial leverage and that limit the amount of letters of credit that can support Funds at Lloyd's, consistent with Lloyd's requirements. As of March 31, 2023, The Hartford was in compliance with all financial covenants of the facility. For further information regarding the Club Facility, see Note 13 - Debt of Notes to Consolidated Financial Statements included in the Company’s 2022 Form 10-K Annual Report. | PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS The Company does not have a 2023 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. Based on the funded status of the U.S. qualified defined benefit pension plan, the Company does not anticipate contributing to the plan in 2023. For further discussion of pension and other postretirement benefit obligations, see Note 16 - Employee Benefit Plans of Notes to Condensed Consolidated Financial Statements. | 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 rating 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 terminate agreements and demand immediate settlement of the outstanding net derivative positions transacted under each agreement. For further information, refer to Note 13 - Commitments and Contingencies of Notes to Condensed Consolidated Financial Statements. As of March 31, 2023, no derivative positions would be subject to 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, underwriting and investment cash flows continue to provide sufficient liquidity to meet anticipated demands. The principal sources of operating funds are premiums, fees earned from insurance and administrative service agreements and investment income, while investing cash flows primarily originate from maturities and sales of invested assets. The Company’s insurance operations consist of property and casualty insurance products (collectively referred to as “Property & Casualty Operations”) and Group Benefits. 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. Liquidity requirements that are unable to be funded by 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 losses. The following tables represent the fixed maturity holdings, including the aforementioned cash and short-term investments available to meet liquidity needs, for each of the Company’s insurance operations. Property & Casualty As of March 31, 2023 Fixed maturities $ 29,699 Short-term investments 2,601 Cash 130 Less: Derivative collateral 43 Total $ 32,387 Property & Casualty operations invested assets also include $789 in equity securities, $4.4 billion in mortgage loans and $3.4 billion in limited partnerships and other alternative investments. Group Benefits Operations As of March 31, 2023 Fixed maturities $ 7,876 Short-term investments 420 Cash 12 Less: Derivative collateral 14 Total $ 8,294 Group Benefits operations invested assets also include $216 in equity securities, $1.6 billion in mortgage loans and $904 in limited partnerships and other alternative investments. 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. Property & Casualty reserves for unpaid losses and loss adjustment expenses as of March 31, 2023 were $33.4 billion and net of reinsurance were $27.0 billion. Reserves for Property & Casualty unpaid losses and loss adjustment expenses include 96 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations case reserves and incurred but not reported (" IBNR" ). The ultimate amount to be paid to settle both case reserves and IBNR is an estimate, subject to significant uncertainty. The actual amount to be paid is not finally determined until the Company reaches a settlement with the claimant. Final claim settlements may vary significantly from the present estimates, particularly since many claims will not be settled until well into the future. For a discussion of The Hartford’s judgment in estimating reserves for Property & Casualty see Part II, Item 7, MD&A - Critical Accounting Estimates, Property & Casualty Insurance Product Reserves, Net of Reinsurance in the Company's 2022 Form 10-K Annual Report, and for historical payments by reserve line net of reinsurance, see Note 11, Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Consolidated Financial Statements included in the Company's 2022 Form 10-K Annual Report. The timing of future payments for the next twelve months and for beyond twelve months could vary materially from historical payment patterns due to, among other things, changes in claim reporting and payment patterns and large unanticipated settlements. In particular, there is significant uncertainty over the claim payment patterns of asbestos and environmental claims. Group Benefits reserves as of March 31, 2023 were $8.9 billion and net of reinsurance were $8.7 billion. Group life and disability obligations are estimated using assumptions based on the Company’s historical experience, modified for recent observed trends. For a discussion of The Hartford’s judgment in estimating reserves for Group Benefits see Part II, Item 7, MD&A - Critical Accounting Estimates, Group Benefit Reserves, Net of Reinsurance, in the Company’s 2022 Form 10-K Annual Report. For additional information about future policy benefits and other policyholder funds and benefits payable, see Note 10 Reserve for Future Policy Benefits and and Note 11, Other Policyholder Funds and Benefits Payable of Notes to Condensed Consolidated Financial Statements and for historical payments by reserve line, net of reinsurance, see Note 11, Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Consolidated Financial Statements included in the Company's 2022 Form 10-K Annual Report. Due to the significance of the assumptions used, payments for the next twelve months and beyond twelve months could materially differ from historical patterns. Corporate includes reserves of $417 as of March 31, 2023 related to retained run-off liabilities of its former life and annuity business. For additional information about future policy benefits and other policyholder funds and benefits payable, see Note 10, Reserve for Future Policy Benefits and Note 11, Other Policyholder Funds and Benefits Payable of Notes to Condensed Consolidated Financial Statements. Hartford Funds Hartford Funds principal sources of operating funds are fees earned from basis points on assets under management with uses primarily for payments to subadvisors and other general operating expenses. As of March 31, 2023, Hartford Funds cash and short-term investments were $259. | PURCHASE AND OTHER OBLIGATIONS The Hartford’s unfunded commitments to purchase investments in limited partnerships and other alternative investments, private placements, and mortgage loans are disclosed in Note 14 - Commitments and Contingencies of Notes to Consolidated Financial Statements in The Hartford's 2022 Form 10-K Annual Report. It is anticipated that these unfunded commitments will be funded through the Company’s normal operating and investing activities. In the normal course of business, the Company enters into contractual commitments to purchase various goods and services such as maintenance, human resources, and information technology. The Company’s operating lease commitments are disclosed in Note 20 - Leases of Notes to Consolidated Financial Statements in The Hartford's 2022 Form 10-K Annual Report. It is anticipated that these purchase commitments and operating lease obligations will be funded through the Company’s normal operating and investing activities. | CAPITALIZATION Capital Structure March 31, 2023 December 31, 2022 Change Long-term debt $ 4,358 $ 4,357 — % Total debt 4,358 4,357 — % Common stockholders' equity excluding AOCI, net of tax 17,260 17,183 — % Preferred stock 334 334 — % AOCI, net of tax (3,254) (3,841) 15 % Total stockholders’ equity 14,340 13,676 5 % Total capitalization $ 18,698 $ 18,033 4 % Debt to stockholders’ equity 30 % 32 % Debt to capitalization 23 % 24 % Total capitalization increased $665 as of March 31, 2023 compared to December 31, 2022 primarily due to a decrease in net unrealized losses on fixed maturities, AFS and net income in 97 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations excess of common stockholder dividends in the period, partially offset by share repurchases. For additional information on AOCI, net of tax, including net unrealized gain (losses) from securities, see Note 15 - Changes In and Reclassifications From Accumulated Other Comprehensive Income (Loss) and Note 5 - Investments of Notes to Condensed Consolidated Financial Statements. For additional information on debt, see Note 13 - Debt of Notes to Consolidated Financial Statement in The Hartford's 2022 Form 10-K Annual Report. | CASH FLOW[1] Three Months Ended March 31, 2023 2022 Net cash provided by operating activities $ 871 $ 429 Net cash provided by (used for) investing activities $ (446) $ 126 Net cash used for financing activities $ (545) $ (586) Cash and restricted cash– end of period $ 218 $ 306 Cash provided by operating activities increased in 2023 as compared to the prior year period primarily driven by an increase in P&C and Group Benefits premiums received and lower Group Benefits loss and loss adjustment expenses paid, partially offset by higher P&C loss and loss adjustment expenses paid and higher operating expenses, including increased commissions and staffing costs. Cash provided by (used for) investing activities decreased from net inflows in the 2022 period to net outflows in the 2023 period as a result of a change from net proceeds from to net payments for fixed maturities, partially offset by a change from net payments for to net proceeds from equity securities, as well as a decrease in net payments for mortgage loans and partnerships. Cash used for financing activities decreased primarily due to a decrease in share repurchases. Operating cash flows for the three months ended March 31, 2023 has been adequate to meet liquidity requirements. | EQUITY MARKETS For a discussion of the potential impact of the equity markets on capital and liquidity, see the Financial Risk section in this MD&A and the Financial Risk on Statutory Capital section of the MD&A in the Company's 2022 Form 10-K Annual Report. | RATINGS Ratings are an important factor in establishing a competitive position in the insurance marketplace and impact the Company's ability to access financing and its cost of borrowing. There can be no assurance that the Company’s ratings will continue for any given period of time, or that they will not be changed. In the event the Company’s ratings are downgraded, the Company’s competitive position, ability to access financing, and its cost of borrowing, may be adversely impacted. Insurance Financial Strength Ratings as of April 26, 2023 A.M. Best Standard & Poor’s Moody’s Hartford Fire Insurance Company A+ A+ A1 Hartford Life and Accident Insurance Company A+ A+ A1 Navigators Insurance Company A+ A+ Not Rated Other Ratings: The Hartford Financial Services Group, Inc.: Senior debt a- BBB+ Baa1 These ratings are not a recommendation to buy, sell or hold any of The Hartford's securities and they may be revised or withdrawn at any time at the discretion of the rating organization. Each agency's rating should be evaluated independently of any other agency's rating. The system and the number of rating categories can vary across rating agencies. Among other factors, rating agencies consider the level of statutory capital and surplus of our U.S. insurance subsidiaries as well as the level of GAAP capital held by the Company in determining the Company's financial strength and credit ratings. Rating agencies may implement changes to their capital formulas that have the effect of increasing the amount of capital we must hold in order to maintain our current ratings. See Risk Factors disclosed in Item 1A of Part I of the Company's 2022 Form 10-K Annual Report. 98 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations | STATUTORY CAPITAL U.S. Statutory Capital Rollforward for the Company's Insurance Subsidiaries Property and Casualty Insurance Subsidiaries [1] [2] Group Benefits Insurance Subsidiary Total U.S statutory capital at January 1, 2023 $ 12,111 $ 2,571 $ 14,682 Statutory income 410 114 524 Dividends to parent (193) (150) (343) Other items 22 (8) 14 Net change to U.S. statutory capital 239 (44) 195 U.S statutory capital at March 31, 2023 $ 12,350 $ 2,527 $ 14,877 [1] The statutory capital for property and casualty insurance subsidiaries in this table does not include the value of an intercompany note owed by HHI to Hartford Fire Insurance Company. [2] Excludes insurance operations in the U.K. | CONTINGENCIES Legal Proceedings For a discussion regarding The Hartford’s legal proceedings, see the information contained in Note 13 - Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements. Legislative and Regulatory Developments For a discussion regarding legislative and regulatory developments, see Part II, Item 7, MD&A - Capital Resources and Liquidity, Contingencies in the Company’s 2022 Form 10-K Annual Report. IMPACT OF NEW ACCOUNTING STANDARDS For a discussion of accounting standards, see Note 1 - Basis of Presentation and Significant Accounting Policies of Notes to Consolidated Financial Statements included in The Hartford’s 2022 Form 10-K Annual Report and Note 1 - Basis of Presentation and Significant Accounting Policies of Notes to Condensed Consolidated Financial Statements of this Form 10-Q. 99 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ACRONYMS A&E Asbestos and Environmental HHI Hartford Holdings, Inc. ABS Asset Backed Securities HIMCO Hartford Investment Management Company ACL Allowance for Credit Losses HLA Hartford Life and Accident Insurance Company ADC Adverse Development Cover IBNR Incurred But Not Reported AFS Available-For-Sale LAE Loss Adjustment Expense ALAE Allocated Loss Adjustment Expenses LCL Liability for Credit Losses AOCI Accumulated Other Comprehensive Income LIBOR London Inter-Bank Offered Rate AUM Assets Under Management LTD Long-Term Disability BSA Boy Scouts of America LTV Loan-to-Value CAY Current Accident Year MD&A Management's Discussion and Analysis of Financial Conditions and Results of Operations CLO Collateralized Loan Obligations NAIC National Association of Insurance Commissioners CMBS Commercial Mortgage-Backed Securities NICO National Indemnity Company, a subsidiary of Berkshire Hathaway Inc. (“Berkshire”) CPRI Credit and Political Risk Insurance NM Not Meaningful DAC Deferred Policy Acquisition Costs NOLs Net Operating Loss Carryforwards or Carrybacks DEI Diversity, Equity and Inclusion OCI Other Comprehensive Income DLR Disabled Life Reserve OTC Over-the-Counter DSCR Debt Service Coverage Ratio P&C Property and Casualty ERCC Enterprise Risk and Capital Committee PG&E PG&E Corporation and Pacific Gas and Electric Company ESPP The Hartford Employee Stock Purchase Plan PV&T Political Violence and Terrorism ETF Exchange-Traded Funds PYD Prior Accident Year Development FASB Financial Accounting Standards Board RBC Risk-Based Capital FHLBB Federal Home Loan Bank of Boston RMBS Residential Mortgage-Backed Securities FVO Fair Value Option ROA Return on Assets GAAP Generally Accepted Accounting Principles ROE Return on Equity HFSG Hartford Financial Services Group, Inc. ULAE Unallocated Loss Adjustment Expenses 100 | Table of Contents Part I - Item 4. Controls and Procedures