HARTFORD INSURANCE GROUP, INC. 10-Q

Item 1. FINANCIAL STATEMENTS REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of The Hartford Financial Services Group, Inc. Hartford, Connecticut Results of Review of Interim Financial Information We have reviewed the accompanying condensed consolidated balance sheet of The Hartford Financial Services Group, Inc. and subsidiaries (the "Company") as of September 30, 2024, the related condensed consolidated statements of operations, comprehensive income (loss), and changes in stockholders' equity for the three-month and nine-month periods ended September 30, 2024 and 2023, and of cash flows for the nine-month periods ended September 30, 2024 and 2023, and the related notes (collectively referred to as the "interim financial information"). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America. We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2023, and the related consolidated statements of operations, comprehensive income (loss), changes in stockholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated February 23, 2024, we expressed an unqualified opinion on those consolidated financial statements and included an explanatory paragraph regarding a change in accounting principle for the measurement and disclosure of long-duration contracts issued by insurance companies. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2023, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. Basis for Review Results This interim financial information is the responsibility of the Company's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our reviews in accordance with standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. /s/ Deloitte & Touche LLP Hartford, Connecticut October 24, 2024 6 | Table of Contents THE HARTFORD FINANCIAL SERVICES GROUP, INC. Condensed Consolidated Statements of Operations Three Months Ended September 30, Nine Months Ended September 30, (in millions, except for per share data) 2024 2023 2024 2023 (Unaudited) Revenues Earned premiums $ 5,734 $ 5,310 $ 16,758 $ 15,593 Fee income 347 330 1,019 977 Net investment income 659 597 1,854 1,652 Net realized losses ( 13 ) ( 90 ) ( 44 ) ( 161 ) Other revenues 24 21 69 66 Total revenues 6,751 6,168 19,656 18,127 Benefits, losses and expenses Benefits, losses and loss adjustment expenses 3,823 3,543 11,095 10,605 Amortization of deferred policy acquisition costs ("DAC") 585 517 1,691 1,510 Insurance operating costs and other expenses 1,323 1,226 3,891 3,667 Interest expense 49 50 149 150 Amortization of other intangible assets 18 18 53 53 Restructuring and other costs 1 1 2 4 Total benefits, losses and expenses 5,799 5,355 16,881 15,989 Income before income taxes 952 813 2,775 2,138 Income tax expense 185 162 517 405 Net income 767 651 2,258 1,733 Preferred stock dividends 6 6 16 16 Net income available to common stockholders $ 761 $ 645 $ 2,242 $ 1,717 Net income available to common stockholders per common share Basic $ 2.60 $ 2.12 $ 7.59 $ 5.55 Diluted $ 2.56 $ 2.09 $ 7.47 $ 5.48 See Notes to Condensed Consolidated Financial Statements. 7 | Table of Contents THE HARTFORD FINANCIAL SERVICES GROUP, INC. Condensed Consolidated Statements of Comprehensive Income (Loss) Three Months Ended September 30, Nine Months Ended September 30, (in millions) 2024 2023 2024 2023 (Unaudited) Net income $ 767 $ 651 $ 2,258 $ 1,733 Other comprehensive income (loss) ("OCI"): Change in net unrealized gain (loss) on fixed maturities, available-for-sale ("AFS") 1,061 ( 671 ) 811 ( 354 ) Change in unrealized losses on fixed maturities with an allowance for credit losses ("ACL") 2 1 3 ( 2 ) Change in net gain (loss) on cash flow hedging instruments 3 ( 4 ) 12 ( 13 ) Change in foreign currency translation adjustments 6 ( 1 ) 4 4 Change in liability for future policy benefits adjustments ( 16 ) 15 ( 6 ) 12 Change in pension and other postretirement plan adjustments 7 6 20 16 Other comprehensive income (loss), net of tax 1,063 ( 654 ) 844 ( 337 ) Comprehensive income (loss) $ 1,830 $ ( 3 ) $ 3,102 $ 1,396 See Notes to Condensed Consolidated Financial Statements. 8 | Table of Contents THE HARTFORD FINANCIAL SERVICES GROUP, INC. Condensed Consolidated Balance Sheets (in millions, except for share and per share data) September 30, 2024 December 31, 2023 (Unaudited) Assets Investments: Fixed maturities, AFS, at fair value (amortized cost of $ 43,664 and $ 41,726 , and ACL of $ 16 and $ 21 ) $ 42,793 $ 39,818 Fixed maturities, at fair value using the fair value option ("FVO Securities") 263 327 Equity securities, at fair value 634 864 Mortgage loans (net of ACL of $ 44 and $ 51 ) 6,415 6,087 Limited partnerships and other alternative investments 5,019 4,785 Other investments 262 191 Short-term investments 3,964 3,850 Total investments 59,350 55,922 Cash 223 126 Restricted cash 58 63 Accrued investment income 445 404 Premiums receivable and agents' balances (net of ACL of $ 117 and $ 109 ) 6,151 5,607 Reinsurance recoverables (net of allowance for uncollectible reinsurance of $ 102 and $ 103 ) 7,052 7,104 Deferred policy acquisition costs 1,270 1,113 Deferred income taxes, net 976 1,173 Goodwill 1,911 1,911 Property and equipment, net 871 896 Other intangible assets, net 654 707 Other assets 2,258 1,754 Total assets $ 81,219 $ 76,780 Liabilities Unpaid losses and loss adjustment expenses $ 43,881 $ 42,318 Reserve for future policy benefits 470 484 Other policyholder funds and benefits payable 613 638 Unearned premiums 9,599 8,599 Long-term debt 4,365 4,362 Other liabilities 5,283 5,052 Total liabilities 64,211 61,453 Commitments and Contingencies (Note 14) Stockholders’ Equity Preferred stock, $ 0.01 par value — 50,000,000 shares authorized, 13,800 shares issued at September 30, 2024 and December 31, 2023, aggregate liquidation preference of $ 345 334 334 Common stock, $ 0.01 par value — 1,500,000,000 shares authorized, 326,960,228 shares issued at September 30, 2024 and December 31, 2023 3 3 Additional paid-in capital 564 648 Retained earnings 20,834 19,007 Treasury stock, at cost 36,143,381 and 28,488,130 shares ( 2,722 ) ( 1,816 ) Accumulated other comprehensive income (loss) ("AOCI"), net of tax ( 2,005 ) ( 2,849 ) Total stockholders’ equity 17,008 15,327 Total liabilities and stockholders’ equity $ 81,219 $ 76,780 See Notes to Condensed Consolidated Financial Statements. 9 | Table of Contents THE HARTFORD FINANCIAL SERVICES GROUP, INC. Condensed Consolidated Statements of Changes in Stockholders' Equity Three Months Ended September 30, Nine Months Ended September 30, (in millions, except for share and per share data) 2024 2023 2024 2023 (Unaudited) Preferred Stock $ 334 $ 334 $ 334 $ 334 Common Stock 3 3 3 3 Additional Paid-in Capital Additional Paid-in Capital, beginning of period 558 1,864 648 1,895 Issuance of shares under incentive and stock compensation plans and other ( 18 ) ( 14 ) ( 194 ) ( 133 ) Stock-based compensation plans expense 24 19 110 107 Additional Paid-in Capital, end of period 564 1,869 564 1,869 Retained Earnings Retained Earnings, beginning of period 20,209 17,865 19,007 17,058 Net income 767 651 2,258 1,733 Dividends declared on preferred stock ( 6 ) ( 6 ) ( 16 ) ( 16 ) Dividends declared on common stock ( 136 ) ( 128 ) ( 415 ) ( 393 ) Retained Earnings, end of period 20,834 18,382 20,834 18,382 Treasury Stock, at cost Treasury Stock, at cost, beginning of period ( 2,356 ) ( 2,390 ) ( 1,816 ) ( 1,773 ) Treasury stock acquired ( 404 ) ( 354 ) ( 1,111 ) ( 1,061 ) Issuance of shares under incentive and stock compensation plans from treasury stock and other 41 17 288 156 Net shares acquired related to employee incentive and stock compensation plans ( 3 ) ( 4 ) ( 83 ) ( 53 ) Treasury Stock, at cost, end of period ( 2,722 ) ( 2,731 ) ( 2,722 ) ( 2,731 ) Accumulated Other Comprehensive Income (Loss), net of tax Accumulated Other Comprehensive Income (Loss), net of tax, beginning of period ( 3,068 ) ( 3,524 ) ( 2,849 ) ( 3,841 ) Total other comprehensive income (loss) 1,063 ( 654 ) 844 ( 337 ) Accumulated Other Comprehensive Income (Loss), net of tax, end of period ( 2,005 ) ( 4,178 ) ( 2,005 ) ( 4,178 ) Total Stockholders’ Equity $ 17,008 $ 13,679 $ 17,008 $ 13,679 Preferred Shares Outstanding 13,800 13,800 13,800 13,800 Common Shares Outstanding (in thousands) Common Shares Outstanding, beginning of period 293,989 307,071 298,472 315,111 Treasury stock acquired ( 3,660 ) ( 4,825 ) ( 11,007 ) ( 14,552 ) Issuance of shares under incentive and stock compensation plans and other 512 243 4,216 2,555 Return of shares under incentive and stock compensation plans to treasury stock ( 24 ) ( 52 ) ( 864 ) ( 677 ) Common Shares Outstanding, at end of period 290,817 302,437 290,817 302,437 Cash dividends declared per common share $ 0.470 $ 0.425 $ 1.410 $ 1.275 Cash dividends declared per preferred share $ 375.00 $ 375.00 $ 1,125.00 $ 1,125.00 See Notes to Condensed Consolidated Financial Statements. 10 | Table of Contents THE HARTFORD FINANCIAL SERVICES GROUP, INC. Condensed Consolidated Statements of Cash Flows Nine Months Ended September 30, (in millions) 2024 2023 Operating Activities (Unaudited) Net income $ 2,258 $ 1,733 Adjustments to reconcile net income to net cash provided by operating activities: Net realized losses 44 161 Amortization of deferred policy acquisition costs 1,691 1,510 Additions to deferred policy acquisition costs ( 1,848 ) ( 1,636 ) Depreciation and amortization 272 386 Other operating activities, net 237 166 Change in assets and liabilities: Decrease (increase) in reinsurance recoverables 36 ( 10 ) Net change in accrued and deferred income taxes ( 179 ) ( 73 ) Increase in insurance liabilities 2,528 1,278 Net change in premiums receivable and agents' balances ( 594 ) ( 630 ) Net change in other assets and other liabilities ( 410 ) ( 292 ) Net cash provided by operating activities 4,035 2,593 Investing Activities Proceeds from the sale/maturity/prepayment of: Fixed maturities, AFS 7,985 4,908 Fixed maturities, at fair value using the fair value option 50 1 Equity securities, at fair value 308 1,893 Mortgage loans 444 858 Limited partnership and other alternative investments 136 230 Payments for the purchase of: Fixed maturities, AFS ( 9,962 ) ( 6,920 ) Fixed maturities, at fair value using the fair value option — — Equity securities, at fair value ( 11 ) ( 951 ) Mortgage loans ( 758 ) ( 883 ) Limited partnership and other alternative investments ( 475 ) ( 747 ) Net proceeds from (payments for) derivatives 48 ( 133 ) Net additions of property and equipment ( 171 ) ( 151 ) Net proceeds from short-term investments 20 640 Other investing activities, net ( 26 ) ( 11 ) Net cash used for investing activities ( 2,412 ) ( 1,266 ) Financing Activities Deposits and other additions to investment and universal life-type contracts 86 75 Withdrawals and other deductions from investment and universal life-type contracts ( 96 ) ( 78 ) Net issuance (return) of shares under incentive and stock compensation plans 16 ( 25 ) Treasury stock acquired ( 1,100 ) ( 1,050 ) Dividends paid on preferred stock ( 16 ) ( 16 ) Dividends paid on common stock ( 419 ) ( 399 ) Net cash used for financing activities ( 1,529 ) ( 1,493 ) Foreign exchange rate effect on cash ( 2 ) 3 Net increase (decrease) in cash and restricted cash 92 ( 163 ) Cash and restricted cash – beginning of period 189 344 Cash and restricted cash– end of period $ 281 $ 181 Supplemental Disclosure of Cash Flow Information Income tax paid $ 663 $ 482 Interest paid $ 168 $ 155 See Notes to Condensed Consolidated Financial Statements. 11 | Table of Contents Note 1 - Basis of Presentation and Significant Accounting Policies THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in millions, except for per share data, unless otherwise stated) (Unaudited) 1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The Hartford Financial Services Group, Inc. is a holding company for insurance and financial services subsidiaries that provide property and casualty insurance, group benefits insurance and services, and mutual funds and exchange-traded funds ("ETF") to individual and business customers in the United States as well as in the United Kingdom and other international locations (collectively, “The Hartford”, the “Company”, “we” or “our”). The Condens ed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, which differ materially from the accounting practices prescribed by various insurance regulatory authorities. These Condensed Consolidated Financial Statements and Notes should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Company's 2023 Form 10-K Annual Report. The results of operations for interim periods are not necessarily indicative of the results that may be expected for the full year. The accompanying Condensed Consolidated Financial Statements and Notes are unaudited. These financial statements reflect all adjustments (generally consisting only of normal accruals) which are, in the opinion of management, necessary for the fair statement of the financial position, results of operations and cash flows for the interim periods. Consolidation The Condensed Consolidated Financial Statements include the accounts of The Hartford Financial Services Group, Inc., and entities in which the Company directly or indirectly has a controlling financial interest. Entities in which the Company has significant influence over the operating and financing decisions but does not control are reported using the equity method. Intercompany transactions and balances between The Hartford and its subsidiaries and affiliates have been eliminated. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The most significant estimates include those used in determining property and casualty and group long-term disability ("LTD") insurance product reserves, net of reinsurance; evaluation of goodwill for impairment; valuation of investments and derivative instruments; and contingencies relating to corporate litigation and regulatory matters. 2. EARNINGS PER COMMON SHARE Computation of Basic and Diluted Earnings per Common Share Three Months Ended September 30, Nine Months Ended September 30, (In millions, except for per share data) 2024 2023 2024 2023 Earnings Net income $ 767 $ 651 $ 2,258 $ 1,733 Less: Preferred stock dividends 6 6 16 16 Net income available to common stockholders $ 761 $ 645 $ 2,242 $ 1,717 Shares Weighted average common shares outstanding, basic 292.6 304.6 295.4 309.3 Dilutive effect of stock-based awards under compensation plans 4.9 4.4 4.6 4.3 Weighted average common shares outstanding and dilutive potential common shares 297.5 309.0 300.0 313.6 Net income available to common stockholders per common share Basic $ 2.60 $ 2.12 $ 7.59 $ 5.55 Diluted $ 2.56 $ 2.09 $ 7.47 $ 5.48 12 | Table of Contents Note 3 - Segment Information THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) 3. SEGMENT INFORMATION The Company currently conducts business principally in five reportable segments including Commercial Lines, Personal Lines, Property & Casualty ("P&C") Other Operations, Group Benefits and Hartford Funds, as well as a Corporate category. Net Income (Loss) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Commercial Lines $ 528 $ 519 $ 1,641 $ 1,398 Personal Lines 31 ( 12 ) 54 ( 73 ) Property & Casualty Other Operations 10 9 29 24 Group Benefits 156 146 435 359 Hartford Funds 54 41 143 127 Corporate ( 12 ) ( 52 ) ( 44 ) ( 102 ) Net income 767 651 2,258 1,733 Preferred stock dividends 6 6 16 16 Net income available to common stockholders $ 761 $ 645 $ 2,242 $ 1,717 13 | Table of Contents Note 3 - Segment Information THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) Revenues Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Earned premiums and fee income: Commercial Lines Workers’ compensation $ 933 $ 919 $ 2,776 $ 2,741 Liability 575 522 1,641 1,510 Marine 71 67 205 192 Package business 593 534 1,714 1,532 Property 325 250 921 722 Professional liability 209 198 612 582 Bond 82 82 240 239 Assumed reinsurance 194 156 555 437 Automobile 278 234 787 679 Total Commercial Lines 3,260 2,962 9,451 8,634 Personal Lines Automobile 621 546 1,791 1,589 Homeowners 272 245 780 716 Total Personal Lines [1] 893 791 2,571 2,305 Group Benefits Group disability 889 884 2,674 2,628 Group life 659 643 1,967 1,936 Other 107 102 318 304 Total Group Benefits 1,655 1,629 4,959 4,868 Hartford Funds Mutual fund and ETF 244 229 710 678 Third-party life and annuity separate accounts 19 19 56 55 Total Hartford Funds 263 248 766 733 Corporate 10 10 30 30 Total earned premiums and fee income 6,081 5,640 17,777 16,570 Net investment income 659 597 1,854 1,652 Net realized losses ( 13 ) ( 90 ) ( 44 ) ( 161 ) Other revenues 24 21 69 66 Total revenues $ 6,751 $ 6,168 $ 19,656 $ 18,127 [1] For the three months ended September 30, 2024 and 2023, AARP members accounted for earned premiums of $ 817 and $ 731 , respectively. For the nine months ended September 30, 2024 and 2023, AARP members accounted for earned premiums of $ 2.36 billion and $ 2.13 billion, respectively. 14 | Table of Contents Note 3 - Segment Information THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) Non-Insurance Revenue from Contracts with Customers Three Months Ended September 30, Nine Months Ended September 30, Revenue Line Item 2024 2023 2024 2023 Commercial Lines Installment billing fees Fee income $ 11 $ 11 $ 33 $ 31 Personal Lines Installment billing fees Fee income 8 7 24 22 Insurance servicing revenues Other revenues 22 21 66 64 Group Benefits Administrative services Fee income 55 54 166 161 Hartford Funds Advisory, servicing and distribution fees Fee income 263 248 766 733 Corporate Investment management and other fees Fee income 10 10 30 30 Other Other revenues — — — 1 Total non-insurance revenues with customers $ 369 $ 351 $ 1,085 $ 1,042 4. FAIR VALUE MEASUREMENTS The Company carries certain financial assets and liabilities at estimated fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants. Our fair value framework includes a hierarchy that gives the highest priority to the use of quoted prices in active markets, followed by the use of market observable inputs, followed by the use of unobservable inputs. The fair value hierarchy levels are as follows: Level 1 Fair values based primarily on unadjusted quoted prices for identical assets or liabilities, in active markets that the Company has the ability to access at the measurement date. Level 2 Fair values primarily based on observable inputs, other than quoted prices included in Level 1, or based on prices for similar assets and liabilities. Level 3 Fair values derived when one or more of the significant inputs are unobservable (including assumptions about risk). With little or no observable market, the determination of fair values uses considerable judgment and represents the Company’s best estimate of an amount that could be realized in a market exchange for the asset or liability. Also included are securities that are traded within illiquid markets and/or priced by independent brokers. The Company will classify the financial asset or liability by level based upon the lowest level input that is significant to the determination of the fair value. In most cases, both observable inputs (e.g., changes in interest rates) and unobservable inputs (e.g., changes in risk assumptions) are used to determine fair values that the Company has classified within Level 3. 15 | Table of Contents Note 4 - Fair Value Measurements THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) Assets and (Liabilities) Carried at Fair Value by Hierarchy Level as of September 30, 2024 Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets accounted for at fair value on a recurring basis Fixed maturities, AFS Asset-backed securities ("ABS") $ 3,512 $ — $ 3,464 $ 48 Collateralized loan obligations ("CLOs") 3,563 — 3,314 249 Commercial mortgage-backed securities ("CMBS") 2,857 — 2,651 206 Corporate 20,558 — 18,301 2,257 Foreign government/government agencies 541 — 541 — Municipal 5,654 — 5,654 — Residential mortgage-backed securities ("RMBS") 5,123 — 5,068 55 U.S. Treasuries 985 6 979 — Total fixed maturities, AFS 42,793 6 39,972 2,815 FVO securities 263 — 111 152 Equity securities, at fair value [1] 634 345 212 77 Derivative assets Credit derivatives 30 — 30 — Interest rate derivatives 1 — 1 — Total derivative assets [2] 31 — 31 — Short-term investments 3,964 910 3,045 9 Total assets accounted for at fair value on a recurring basis $ 47,685 $ 1,261 $ 43,371 $ 3,053 Liabilities accounted for at fair value on a recurring basis Derivative liabilities Credit derivatives $ ( 30 ) $ — $ ( 30 ) $ — Equity derivatives 5 — — 5 Foreign exchange derivatives 12 — 12 — Interest rate derivatives ( 6 ) — ( 6 ) — Total derivative liabilities [3] ( 19 ) — ( 24 ) 5 Total liabilities accounted for at fair value on a recurring basis $ ( 19 ) $ — $ ( 24 ) $ 5 16 | Table of Contents Note 4 - Fair Value Measurements THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) Assets and (Liabilities) Carried at Fair Value by Hierarchy Level as of December 31, 2023 Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets accounted for at fair value on a recurring basis Fixed maturities, AFS ABS $ 3,320 $ — $ 3,320 $ — CLOs 3,090 — 2,977 113 CMBS 3,125 — 2,898 227 Corporate 17,866 — 16,005 1,861 Foreign government/government agencies 562 — 562 — Municipal 6,039 — 6,039 — RMBS 4,287 — 4,251 36 U.S. Treasuries 1,529 18 1,511 — Total fixed maturities, AFS 39,818 18 37,563 2,237 FVO securities 327 — 160 167 Equity securities, at fair value [1] 864 333 473 58 Derivative assets Credit derivatives ( 10 ) — ( 10 ) — Foreign exchange derivatives 9 — 9 — Total derivative assets [2] ( 1 ) — ( 1 ) — Short-term investments 3,850 1,400 2,425 25 Total assets accounted for at fair value on a recurring basis $ 44,858 $ 1,751 $ 40,620 $ 2,487 Liabilities accounted for at fair value on a recurring basis Derivative liabilities Credit derivatives $ 10 $ — $ 10 $ — Foreign exchange derivatives 4 — 4 — Interest rate derivatives ( 6 ) — ( 6 ) — Total derivative liabilities [3] 8 — 8 — Total liabilities accounted for at fair value on a recurring basis $ 8 $ — $ 8 $ — [1] Level 3 includes investments that have contractual sales restrictions that require consent to sell and are in place for the duration that the securities are held by the Company. [2] Includes derivative instruments in a net positive fair value position after consideration of the accrued interest and impact of collateral posting requirements which may be imposed by agreements and applicable law. See footnote 3 to this table for derivative liabilities. [3] Includes derivative instruments in a net negative fair value position (derivative liability) after consideration of the accrued interest and impact of collateral posting requirements which may be imposed by agreements and applicable law. The Company has overseas deposits included in other investments of $ 60 and $ 75 as of September 30, 2024 and December 31, 2023, respectively, which are measured at fair value using the net asset value as a practical expedient. Fixed Maturities, Equity Securities, Short-term Investments, and Derivatives Valuation Techniques The Company generally determines fair values using valuation techniques that use prices, rates, and other relevant information evident from market transactions involving identical or similar instruments. Valuation techniques also include, where appropriate, estimates of future cash flows that are converted into a single discounted amount using current market expectations. The Company uses a "waterfall" approach comprised of the following pricing sources and techniques, which are listed in priority order: • Quoted prices, unadjusted, for identical assets or liabilities in active markets, which are classified as Level 1. • Prices from third-party pricing services, which primarily utilize a combination of techniques. These services utilize recently reported trades of identical, similar, or benchmark securities making adjustments for market observable inputs available through the reporting date. If there are no recently reported trades, they may use a discounted cash flow 17 | Table of Contents Note 4 - Fair Value Measurements THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) technique to develop a price using expected cash flows based upon the anticipated future performance of the underlying collateral discounted at an estimated market rate. Both techniques develop prices that consider the time value of future cash flows and provide a margin for risk, including liquidity and credit risk. Most prices provided by third-party pricing services are classified as Level 2 because the inputs used in pricing the securities are observable. However, some securities that are less liquid or trade less actively are classified as Level 3. Additionally, certain long-dated securities include benchmark interest rate or credit spread assumptions that are not observable in the marketplace and are thus classified as Level 3. • Internal matrix pricing is a valuation process internally developed for private placement securities for which the Company is unable to obtain a price from a third-party pricing service. Internal pricing matrices determine credit spreads that, when combined with risk-free rates, are applied to contractual cash flows to develop a price. The Company develops credit spreads using market based data for public securities adjusted for credit spread differentials between public and private securities, which are obtained from a survey of multiple private placement brokers. The market-based reference credit spread considers the issuer’s sector, financial strength, and term to maturity, using an independent public security index, while the credit spread differential considers the non-public nature of the security. Securities priced using internal matrix pricing are classified as Level 2 because the significant inputs are observable or can be corroborated with observable data. • Independent broker quotes, which are typically non-binding, use inputs that can be difficult to corroborate with observable market-based data. Brokers may use present value techniques using assumptions specific to the security types, or they may use recent transactions of similar securities. Due to the lack of transparency in the process that brokers use to develop prices, valuations that are based on independent broker quotes are classified as Level 3. The fair value of derivative instruments is determined primarily using a discounted cash flow model or option model technique and incorporates counterparty credit risk. In some cases, quoted market prices for exchange-traded and over-the-counter ("OTC") cleared derivatives may be used and in other cases independent broker quotes may be used. The pricing valuation models primarily use inputs that are observable in the market or can be corroborated by observable market data. The valuation of certain derivatives may include significant inputs that are unobservable, such as volatility levels, and reflect the Company’s view of what other market participants would use when pricing such instruments. Valuation Controls The process for determining the fair value of investments is monitored by the Valuation Committee, which is a cross-functional group of senior management within the Company. The purpose of the Valuation Committee is to provide oversight of the pricing policy, procedures, and controls, including approval of valuation methodologies and pricing sources. The Valuation Committee reviews market data trends, pricing statistics and trading statistics to ensure that prices are reasonable and consistent with our fair value framework. Controls and procedures used to assess third-party pricing services are reviewed by the Valuation Committee, including the results of annual due-diligence reviews. Controls include, but are not limited to, reviewing daily and monthly price changes, stale prices, and missing prices and comparing new trade prices to third-party pricing services, weekly price changes to published bond index prices, and daily OTC derivative market valuations to counterparty valuations. The Company has a dedicated pricing group that works with trading and investment professionals to challenge prices received by a third-party pricing source if the Company believes that the valuation received does not accurately reflect the fair value. New valuation models and changes to current models require approval by the Valuation Committee. In addition, the Company’s enterprise-wide Operational Risk Management function provides an independent review of the suitability and reliability of model inputs, as well as an analysis of significant changes to current models. Valuation Inputs Quoted prices for identical assets in active markets are considered Level 1 and consist of on-the-run U.S. Treasuries, money market funds, exchange-traded equity securities, open-ended mutual funds, certain short-term investments, and exchange traded derivative instruments. 18 | Table of Contents Note 4 - Fair Value Measurements THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) Valuation Inputs Used in Levels 2 and 3 Measurements for Securities and Derivatives Level 2 Primary Observable Inputs Level 3 Primary Unobservable Inputs Fixed Maturity Investments Structured securities (includes ABS, CLOs, CMBS and RMBS) • Benchmark yields and spreads • Monthly payment information • Collateral performance, which varies by vintage year and includes delinquency rates, loss severity rates and refinancing assumptions • Credit default swap indices Other inputs for ABS, CLOs, and RMBS: • Estimate of future principal prepayments, derived from the characteristics of the underlying structure • Prepayment speeds previously experienced at the interest rate levels projected for the collateral • Independent broker quotes • Credit spreads beyond observable curve • Interest rates beyond observable curve Other inputs for less liquid securities or those that trade less actively, including subprime RMBS: • Estimated cash flows • Credit spreads, which include illiquidity premium • Constant prepayment rates • Constant default rates • Loss severity Corporates • Benchmark yields and spreads • Reported trades, bids, offers of the same or similar securities • Issuer spreads and credit default swap curves Other inputs for investment grade privately placed securities that utilize internal matrix pricing: • Credit spreads for public securities of similar quality, maturity, and sector, adjusted for non-public nature • Independent broker quotes • Credit spreads beyond observable curve • Interest rates beyond observable curve Other inputs for below investment grade privately placed securities and private bank loans: • Credit spreads for public securities of similar quality, maturity, and sector, adjusted for non-public nature U.S. Treasuries, Municipals, and Foreign government/government agencies • Benchmark yields and spreads • Issuer credit default swap curves • Political events in emerging market economies • Municipal Securities Rulemaking Board reported trades and material event notices • Issuer financial statements • Credit spreads beyond observable curve • Interest rates beyond observable curve Equity Securities • Quoted prices in markets that are not active • For privately traded equity securities, internal discounted cash flow models utilizing earnings multiples or other cash flow assumptions that are not observable Short-term Investments • Benchmark yields and spreads • Reported trades, bids, offers • Issuer spreads and credit default swap curves • Material event notices and new issue money market rates • Independent broker quotes • For privately traded investments, credit spreads for public securities of similar quality, maturity, and sector, adjusted for non-public nature Derivatives Credit derivatives • Swap yield curve • Credit default swap curves • Not applicable Foreign exchange derivatives • Swap yield curve • Currency spot and forward rates • Cross currency basis curves • Not applicable Interest rate derivatives • Swap yield curve • Not applicable Equity derivatives • Equity index levels • Equity volatility 19 | Table of Contents Note 4 - Fair Value Measurements THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) Significant Unobservable Inputs for Level 3 - Securities Assets accounted for at fair value on a recurring basis Fair Value Predominant Valuation Technique Significant Unobservable Input Minimum Maximum Weighted Average [1] Impact of Increase in Input on Fair Value [2] As of September 30, 2024 CLOs [3] $ 79 Discounted cash flows Spread 275 bps 275 bps 275 bps Decrease CMBS [3] $ 204 Discounted cash flows Spread (encompasses prepayment, default risk and loss severity) 250 bps 1,204 bps 444 bps Decrease Corporate [4] $ 2,141 Discounted cash flows Spread 34 bps 798 bps 314 bps Decrease RMBS [3] $ 50 Discounted cash flows Spread [6] 68 bps 366 bps 188 bps Decrease Constant prepayment rate [6] 1 % 7 % 4 % Decrease [5] Constant default rate [6] 1 % 4 % 2 % Decrease Loss severity [6] 30 % 50 % 38 % Decrease Short-term investments [3] $ 3 Discounted cash flows Spread 508 bps 551 bps 535 bps Decrease As of December 31, 2023 CLOs [3] $ 98 Discounted cash flows Spread 268 bps 270 bps 269 bps Decrease CMBS [3] $ 226 Discounted cash flows Spread (encompasses prepayment, default risk and loss severity) 365 bps 1,315 bps 509 bps Decrease Corporate [4] $ 1,741 Discounted cash flows Spread 49 bps 743 bps 323 bps Decrease RMBS $ 36 Discounted cash flows Spread [6] 32 bps 298 bps 161 bps Decrease Constant prepayment rate [6] 1 % 5 % 4 % Decrease [5] Constant default rate [6] 1 % 5 % 2 % Decrease Loss severity [6] 10 % 70 % 41 % Decrease Short-term investments [3] $ 15 Discounted cash flows Spread 579 bps 1,254 bps 1,225 bps Decrease [1] The weighted average is determined based on the fair value of the securities. [2] Conversely, the impact of a decrease in input would have the opposite impact to the fair value as that presented in the table. [3] Excludes securities for which the Company bases fair value on broker quotations. [4] Excludes securities for which the Company bases fair value on broker quotations; however, included are broker priced lower-rated private placement securities for which the Company receives spread and yield information to corroborate the fair value. [5] Decrease for above market rate coupons and increase for below market rate coupons. [6] Generally, a change in the assumption used for the constant default rate would have been accompanied by a directionally similar change in the assumption used for the loss severity and a directionally opposite change in the assumption used for constant prepayment rate and would have resulted in wider spreads . As of September 30, 2024 and December 31, 2023, the fair values of the Company's level 3 derivatives were $ 5 and less than $ 1 , respectively. The table above excludes certain securities for which fair values are predominately based on independent broker quotes. While the Company does not have access to the significant unobservable inputs that independent brokers may use in their pricing process, the Company believes brokers likely use inputs similar to those used by the Company and third-party pricing services to price similar instruments. As such, in their pricing models, brokers likely use estimated loss severity rates, prepayment rates, constant default rates and credit spreads. Therefore, similar to non-broker priced securities, increases in these inputs would generally cause fair values to decrease. As of September 30, 2024, no significant adjustments were made by the Company to broker prices received. Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs The Company uses derivative instruments to manage the risk associated with certain assets and liabilities. However, the derivative instrument may not be classified within the same fair value hierarchy level as the associated asset or liability. 20 | Table of Contents Note 4 - Fair Value Measurements THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) Fair Value Rollforwards for Financial Instruments Classified as Level 3 for the Three Months Ended September 30, 2024 Total realized/unrealized gains (losses) Fair value as of June 30, 2024 Included in net income [1] Included in OCI [2] Purchases Settlements Sales Transfers into Level 3 [3] Transfers out of Level 3 [3] Fair value as of September 30, 2024 Assets Fixed maturities, AFS ABS $ 8 $ — $ — $ 40 $ — $ — $ — $ — $ 48 CLOs 500 — — 215 ( 6 ) — — ( 460 ) 249 CMBS 190 ( 2 ) 3 — ( 3 ) ( 10 ) 28 — 206 Corporate 2,061 — 61 246 ( 107 ) ( 13 ) 9 — 2,257 RMBS 40 — — 33 ( 4 ) — — ( 14 ) 55 Total fixed maturities, AFS 2,799 ( 2 ) 64 534 ( 120 ) ( 23 ) 37 ( 474 ) 2,815 FVO securities 160 ( 5 ) — — ( 3 ) — — — 152 Equity securities, at fair value 58 4 — 19 ( 1 ) ( 3 ) — — 77 Short-term investments 25 — — 3 ( 19 ) — — — 9 Total Assets $ 3,042 $ ( 3 ) $ 64 $ 556 $ ( 143 ) $ ( 26 ) $ 37 $ ( 474 ) $ 3,053 Liabilities Derivatives, net [4] Equity $ — $ — $ — $ 5 $ — $ — $ — $ — $ 5 Total Derivatives, net [4] — — — 5 — — — — 5 Total Liabilities $ — $ — $ — $ 5 $ — $ — $ — $ — $ 5 21 | Table of Contents Note 4 - Fair Value Measurements THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) Fair Value Rollforwards for Financial Instruments Classified as Level 3 for the Nine Months Ended September 30, 2024 Total realized/unrealized gains (losses) Fair value as of January 1, 2024 Included in net income [1] Included in OCI [2] Purchases Settlements Sales Transfers into Level 3 [3] Transfers out of Level 3 [3] Fair value as of September 30, 2024 Assets Fixed maturities, AFS ABS $ — $ — $ — $ 56 $ — $ — $ — $ ( 8 ) $ 48 CLOs 113 — — 805 ( 32 ) — — ( 637 ) 249 CMBS 227 ( 4 ) 15 — ( 8 ) ( 58 ) 34 — 206 Corporate 1,861 — 28 558 ( 183 ) ( 16 ) 9 — 2,257 RMBS 36 — — 85 ( 14 ) — — ( 52 ) 55 Total fixed maturities, AFS 2,237 ( 4 ) 43 1,504 ( 237 ) ( 74 ) 43 ( 697 ) 2,815 FVO securities 167 ( 4 ) — — ( 11 ) — — — 152 Equity securities, at fair value 58 4 — 19 ( 1 ) ( 3 ) — — 77 Short-term investments 25 — — 4 ( 20 ) — — — 9 Total Assets $ 2,487 $ ( 4 ) $ 43 $ 1,527 $ ( 269 ) $ ( 77 ) $ 43 $ ( 697 ) $ 3,053 Liabilities Derivatives, net [4] Equity $ — $ — $ — $ 5 $ — $ — $ — $ — $ 5 Total Derivatives, net [4] — — — 5 — — — — 5 Total Liabilities $ — $ — $ — $ 5 $ — $ — $ — $ — $ 5 22 | Table of Contents Note 4 - Fair Value Measurements THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) Fair Value Rollforwards for Financial Instruments Classified as Level 3 for the Three Months Ended September 30, 2023 Total realized/unrealized gains (losses) Fair value as of June 30, 2023 Included in net income [1] Included in OCI [2] Purchases Settlements Sales Transfers into Level 3 [3] Transfers out of Level 3 [3] Fair value as of September 30, 2023 Assets Fixed maturities, AFS ABS $ — $ — $ — $ 46 $ — $ — $ — $ — $ 46 CLOs 85 — — 15 ( 3 ) — — — 97 CMBS 238 — 1 — ( 14 ) — 1 — 226 Corporate 1,622 ( 4 ) ( 24 ) 113 ( 69 ) ( 1 ) 19 ( 1 ) 1,655 RMBS 69 — — 21 ( 7 ) — — ( 19 ) 64 Total fixed maturities, AFS 2,014 ( 4 ) ( 23 ) 195 ( 93 ) ( 1 ) 20 ( 20 ) 2,088 FVO securities 163 13 — — ( 3 ) — — — 173 Equity securities, at fair value 59 — — — ( 1 ) — — — 58 Short-term investments 186 — — 2 ( 3 ) — — — 185 Total Assets $ 2,422 $ 9 $ ( 23 ) $ 197 $ ( 100 ) $ ( 1 ) $ 20 $ ( 20 ) $ 2,504 Fair Value Rollforwards for Financial Instruments Classified as Level 3 for the Nine Months Ended September 30, 2023 Total realized/unrealized gains (losses) Fair value as of January 1, 2023 Included in net income [1] Included in OCI [2] Purchases Settlements Sales Transfers into Level 3 [3] Transfers out of Level 3 [3] Fair value as of September 30, 2023 Assets Fixed maturities, AFS ABS $ 30 $ — $ — $ 82 $ — $ — $ — $ ( 66 ) $ 46 CLOs 115 — — 55 ( 33 ) — — ( 40 ) 97 CMBS 222 ( 2 ) 3 6 ( 15 ) ( 5 ) 17 — 226 Corporate 1,589 ( 5 ) 4 230 ( 150 ) ( 10 ) 50 ( 53 ) 1,655 RMBS 95 — — 40 ( 22 ) — — ( 49 ) 64 Total fixed maturities, AFS 2,051 ( 7 ) 7 413 ( 220 ) ( 15 ) 67 ( 208 ) 2,088 FVO securities 178 — — — ( 5 ) — — — 173 Equity securities, at fair value 61 ( 2 ) — 1 ( 2 ) — — — 58 Short-term investments 193 — — 6 ( 14 ) — — — 185 Total Assets $ 2,483 $ ( 9 ) $ 7 $ 420 $ ( 241 ) $ ( 15 ) $ 67 $ ( 208 ) $ 2,504 [1] Amounts in these columns are generally reported in net realized gains (losses). All amounts are before income taxes. [2] All amounts are before income taxes. [3] Transfers into and/or (out of) Level 3 are primarily attributable to the availability of market observable information and the re-evaluation of the observability of pricing inputs. [4] Derivative instruments are reported in this table on a net basis for asset (liability) positions and reported in the Condensed Consolidated Balance Sheets in other investments and other liabilities. 23 | Table of Contents Note 4 - Fair Value Measurements THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) Changes in Unrealized Gains (Losses) for Financial Instruments Classified as Level 3 Still Held at End of Period Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 2024 2023 2024 2023 Changes in Unrealized Gain/(Loss) included in Net Income [1] [2] Changes in Unrealized Gain/(Loss) included in OCI [3] Changes in Unrealized Gain/(Loss) included in Net Income [1] [2] Changes in Unrealized Gain/(Loss) included in OCI [3] Assets Fixed maturities, AFS CLOs $ — $ — $ — $ — $ — $ — $ — $ 1 CMBS — — 1 — — — 10 2 Corporate — ( 4 ) 58 ( 24 ) — ( 6 ) 26 2 Total fixed maturities, AFS — ( 4 ) 59 ( 24 ) — ( 6 ) 36 5 FVO securities ( 5 ) 13 — — ( 4 ) — — — Equity securities, at fair value 3 — — — 3 ( 1 ) — — Total Assets $ ( 2 ) $ 9 $ 59 $ ( 24 ) $ ( 1 ) $ ( 7 ) $ 36 $ 5 [1] All amounts in these rows are reported in net realized gains (losses) . All amounts are before income taxes. [2] Amounts presented are for Level 3 only and therefore may not agree to other disclosures included herein. [3] Changes in unrealized gains (losses) on fixed maturities, AFS are reported in changes in net unrealized gain (loss) on fixed maturities in the Condensed Consolidated Statements of Comprehensive Income (Loss). Fair Value Option The Company has elected the fair value option for certain investments in residual interests of securitizations and other securities that contain embedded credit derivatives with underlying credit risk related to residential real estate in order to reflect changes in fair value in earnings. These instruments are included within FVO securities on the Condensed Consolidated Balance Sheets and changes in the fair value of these investments are reported in net realized gains and losses. As of September 30, 2024 and December 31, 2023, the fair value of assets using the fair value option was $ 263 and $ 327 , respectively, of which $ 152 and $ 167 , respectively, were residual interests of securitizations. For the three and nine months ended September 30, 2024, net realized losses related to the change in fair value of assets using the fair value option were $ 5 and $ 2 , respectively. For the three and nine months ended September 30, 2023, net realized gains related to the change in fair value of assets using the fair value option were $ 16 and $ 5 , respectively. Financial Instruments Not Carried at Fair Value Financial Assets and Liabilities Not Carried at Fair Value September 30, 2024 December 31, 2023 Fair Value Hierarchy Level Carrying Amount [1] Fair Value Fair Value Hierarchy Level Carrying Amount [1] Fair Value Assets Mortgage loans Level 3 $ 6,415 $ 6,057 Level 3 $ 6,087 $ 5,584 Liabilities Other policyholder funds and benefits payable Level 3 $ 613 $ 613 Level 3 $ 638 $ 639 Senior notes [2] Level 2 $ 3,866 $ 3,615 Level 2 $ 3,863 $ 3,533 Junior subordinated debentures [2] Level 2 $ 499 $ 463 Level 2 $ 499 $ 429 [1] As of September 30, 2024 and December 31, 2023, the carrying amount of mortgage loans is net of ACL of $ 44 and $ 51 , respectively. [2] Included in long-term debt in the Condensed Consolidated Balance Sheets, except for any current maturities, which are included in short-term debt when applicable. 24 | Table of Contents Note 5 - Investments THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) 5. INVESTMENTS Net Realized Gains (Losses) Three Months Ended September 30, Nine Months Ended September 30, (Before tax) 2024 2023 2024 2023 Gross gains on sales of fixed maturities $ 12 $ 6 $ 23 $ 26 Gross losses on sales of fixed maturities ( 62 ) ( 27 ) ( 148 ) ( 87 ) Equity securities [1] Net realized gains (losses) on sales of equity securities 1 1 ( 14 ) 75 Change in net unrealized gains (losses) of equity securities 26 ( 14 ) 90 ( 43 ) Net realized and unrealized gains (losses) on equity securities 27 ( 13 ) 76 32 Net credit losses on fixed maturities, AFS — ( 5 ) ( 2 ) ( 13 ) Change in ACL on mortgage loans — ( 5 ) 3 ( 10 ) Other, net [2] 10 ( 46 ) 4 ( 109 ) Net realized (losses) $ ( 13 ) $ ( 90 ) $ ( 44 ) $ ( 161 ) [1] The change in net unrealized gains (losses) on equity securities still held as of September 30, 2024 and included in net realized gains (losses) were $ 27 and $ 71 for the three and nine months ended September 30, 2024, respectively. The change in net unrealized gains (losses) on equity securities still held as of September 30, 2023 and included in net realized gains (losses) were $( 14 ) and $( 5 ) for the three and nine months ended September 30, 2023, respectively. [2] For the three and nine months ended September 30, 2024 includes gains (losses) from transactional foreign currency revaluation of $( 11 ) and $( 5 ), respectively, and gains (losses) on non-qualifying derivatives of $ 23 and $ 15 , respectively. For the three and nine months ended September 30, 2023 includes gains (losses) from transactional foreign currency revaluation of $ 13 and $( 3 ), respectively, and gains (losses) on non-qualifying derivatives of $( 74 ) and $( 108 ), respectively. Proceeds from the sales of fixed maturities, AFS totaled $ 1.5 billion and $ 4.2 billion for the three and nine months ended September 30, 2024, respectively, and $ 0.8 billion and $ 2.8 billion for the three and nine months ended September 30, 2023. Non-cash investing activities for both the three and nine months ended September 30, 2024, included $ 18 related to the exchange of short-term investments for equity securities. There were no non-cash investing activities for both the three and nine months ended September 30, 2023. Accrued Investment Income on Fixed Maturities, AFS and Mortgage Loans As of September 30, 2024 and December 31, 2023, the Company reported accrued investment income related to fixed maturities, AFS of $ 412 and $ 371 , respectively, and accrued investment income related to mortgage loans of $ 23 and $ 20 , respectively. These amounts are not included in the carrying value of the fixed maturities or mortgage loans. Investment income on fixed maturities and mortgage loans is accrued unless it is past due over 90 days or management deems the interest uncollectible. The Company does not include the current accrued investment income balance when estimating the ACL. The Company has a policy to write-off accrued investment income balances that are more than 90 days past due. Write-offs of accrued investment income are recorded as a credit loss component of net realized gains and losses. Recognition and Presentation of Intent-to-Sell Impairments and ACL on Fixed Maturities, AFS The Company will record an "intent-to-sell impairment" as a reduction to the amortized cost of fixed maturities, AFS in an unrealized loss position if the Company intends to sell or it is more likely than not that the Company will be required to sell the fixed maturity before a recovery in value. A corresponding charge is recorded in net realized losses equal to the difference between the fair value on the impairment date and the amortized cost basis of the fixed maturity before recognizing the impairment. For fixed maturities where a credit loss has been identified and no intent-to-sell impairment has been recorded, the Company will record an ACL for the portion of the unrealized loss related to the credit loss. Any remaining unrealized loss on a fixed maturity after recording an ACL is the non-credit amount and is recorded in OCI. The ACL is the excess of the amortized cost over the greater of the Company's best estimate of the present value of expected future cash flows or the security's fair value. Cash flows are discounted at the effective yield that is used to record interest income. The ACL cannot exceed the unrealized loss and, therefore, it may fluctuate with changes in the fair value of the fixed maturity if the fair value is greater than the Company's best estimate of the present value of expected future cash flows. The initial ACL and any subsequent changes are recorded in net realized gains and losses. The ACL is written off against the amortized cost in the period in which all or a portion of the related fixed maturity is determined to be uncollectible . Developing the Company’s best estimate of expected future cash flows is a quantitative and qualitative process that 25 | Table of Contents Note 5 - Investments THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) incorporates information received from third-party sources along with certain internal assumptions regarding the future performance. The Company's considerations include, but are not limited to, (a) changes in the financial condition of the issuer and/or the underlying collateral, (b) whether the issuer is current on contractually obligated interest and principal payments, (c) credit ratings, (d) payment structure of the security and (e) the extent to which the fair value has been less than the amortized cost of the security. For non-structured securities, assumptions include, but are not limited to, economic and industry-specific trends and fundamentals, instrument-specific developments including changes in credit ratings, industry earnings multiples and the issuer’s ability to restructure, access capital markets, and execute asset sales. For structured securities, assumptions include, but are not limited to, various performance indicators such as historical and projected default and recovery rates, credit ratings, current and projected delinquency rates, loan-to-value (" LTV") ratios, average cumulative collateral loss rates that vary by vintage year, prepayment speeds, and property value declines. These assumptions require the use of significant management judgment and include the probability of issuer default and estimates regarding timing and amount of expected recoveries, which may include estimating the underlying collateral value. ACL on Fixed Maturities, AFS by Type Three Months Ended September 30, 2024 2023 (Before tax) Corporate CMBS Total Corporate CMBS Total Balance as of beginning of period $ 6 $ 13 $ 19 $ 6 $ 12 $ 18 Credit losses on fixed maturities where an allowance was not previously recorded — — — 3 — 3 Reduction due to sales ( 3 ) — ( 3 ) ( 3 ) — ( 3 ) Net increases (decreases) on fixed maturities where an allowance was previously recorded — — — 2 — 2 Balance as of end of period $ 3 $ 13 $ 16 $ 8 $ 12 $ 20 ACL on Fixed Maturities, AFS by Type Nine Months Ended September 30, 2024 2023 (Before tax) Corporate CMBS Total Corporate CMBS Total Balance as of beginning of period $ 9 $ 12 $ 21 $ 2 $ 10 $ 12 Credit losses on fixed maturities where an allowance was not previously recorded — 1 1 9 — 9 Reduction due to sales ( 3 ) — ( 3 ) ( 5 ) — ( 5 ) Net increases (decreases) on fixed maturities where an allowance was previously recorded 1 — 1 2 2 4 Write-offs charged against the allowance ( 4 ) — ( 4 ) — — — Balance as of end of period $ 3 $ 13 $ 16 $ 8 $ 12 $ 20 26 | Table of Contents Note 5 - Investments THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) Fixed Maturities, AFS Fixed Maturities, AFS, by Type September 30, 2024 December 31, 2023 Amortized Cost ACL Gross Unrealized Gains Gross Unrealized Losses Fair Value Amortized Cost ACL Gross Unrealized Gains Gross Unrealized Losses Fair Value ABS $ 3,474 $ — $ 57 $ ( 19 ) $ 3,512 $ 3,347 $ — $ 18 $ ( 45 ) $ 3,320 CLOs 3,553 — 10 — 3,563 3,104 — 3 ( 17 ) 3,090 CMBS 3,062 ( 13 ) 28 ( 220 ) 2,857 3,466 ( 12 ) 19 ( 348 ) 3,125 Corporate 20,850 ( 3 ) 395 ( 684 ) 20,558 18,691 ( 9 ) 197 ( 1,013 ) 17,866 Foreign govt./govt. agencies 543 — 11 ( 13 ) 541 583 — 6 ( 27 ) 562 Municipal 5,779 — 124 ( 249 ) 5,654 6,207 — 131 ( 299 ) 6,039 RMBS 5,356 — 49 ( 282 ) 5,123 4,675 — 18 ( 406 ) 4,287 U.S. Treasuries 1,047 — 20 ( 82 ) 985 1,653 — 26 ( 150 ) 1,529 Total fixed maturities, AFS $ 43,664 $ ( 16 ) $ 694 $ ( 1,549 ) $ 42,793 $ 41,726 $ ( 21 ) $ 418 $ ( 2,305 ) $ 39,818 Fixed Maturities, AFS, by Contractual Maturity Year September 30, 2024 December 31, 2023 Amortized Cost Fair Value Amortized Cost Fair Value One year or less $ 1,298 $ 1,294 $ 1,526 $ 1,501 Over one year through five years 9,437 9,425 9,670 9,433 Over five years through ten years 7,425 7,316 6,568 6,211 Over ten years 10,059 9,703 9,370 8,851 Subtotal 28,219 27,738 27,134 25,996 Mortgage-backed and asset-backed securities 15,445 15,055 14,592 13,822 Total fixed maturities, AFS $ 43,664 $ 42,793 $ 41,726 $ 39,818 Estimated maturities may differ from contractual maturities due to call or prepayment provisions. Due to the potential for variability in payment speeds (i.e., prepayments or extensions), mortgage-backed and asset-backed securities are not categorized by contractual maturity. Concentration of Credit Risk The Company aims to maintain a diversified investment portfolio including issuer, sector and geographic stratification, where applicable, and has established certain exposure limits, diversification standards and review procedures to mitigate credit risk. The Company had no investment exposure to any credit concentration risk of a single issuer greater than 10% of the Company's stockholders' equity as of September 30, 2024 or December 31, 2023 other than U.S. government securities and certain U.S. government agencies. 27 | Table of Contents Note 5 - Investments THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) Unrealized Losses on Fixed Maturities, AFS Unrealized Loss Aging for Fixed Maturities, AFS by Type and Length of Time as of September 30, 2024 Less Than 12 Months 12 Months or More Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses ABS $ 180 $ — $ 469 $ ( 19 ) $ 649 $ ( 19 ) CLOs 262 — — — 262 — CMBS 36 ( 1 ) 2,491 ( 219 ) 2,527 ( 220 ) Corporate 709 ( 7 ) 8,943 ( 677 ) 9,652 ( 684 ) Foreign govt./govt. agencies 37 — 250 ( 13 ) 287 ( 13 ) Municipal 251 ( 1 ) 2,907 ( 248 ) 3,158 ( 249 ) RMBS 237 ( 1 ) 2,876 ( 281 ) 3,113 ( 282 ) U.S. Treasuries 205 ( 1 ) 502 ( 81 ) 707 ( 82 ) Total fixed maturities, AFS in an unrealized loss position $ 1,917 $ ( 11 ) $ 18,438 $ ( 1,538 ) $ 20,355 $ ( 1,549 ) Unrealized Loss Aging for Fixed Maturities, AFS by Type and Length of Time as of December 31, 2023 Less Than 12 Months 12 Months or More Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses ABS $ 604 $ ( 6 ) $ 1,043 $ ( 39 ) $ 1,647 $ ( 45 ) CLOs 209 ( 1 ) 2,249 ( 16 ) 2,458 ( 17 ) CMBS 117 ( 7 ) 2,837 ( 341 ) 2,954 ( 348 ) Corporate 810 ( 10 ) 11,149 ( 1,003 ) 11,959 ( 1,013 ) Foreign govt./govt. agencies 27 — 368 ( 27 ) 395 ( 27 ) Municipal 329 ( 3 ) 3,196 ( 296 ) 3,525 ( 299 ) RMBS 181 ( 3 ) 3,207 ( 403 ) 3,388 ( 406 ) U.S. Treasuries 120 ( 11 ) 1,121 ( 139 ) 1,241 ( 150 ) Total fixed maturities, AFS in an unrealized loss position $ 2,397 $ ( 41 ) $ 25,170 $ ( 2,264 ) $ 27,567 $ ( 2,305 ) As of September 30, 2024, fixed maturities, AFS in an unrealized loss position consisted of 3,100 instruments and were primarily depressed due to higher interest rates and/or wider credit spreads since the purchase date. As of September 30, 2024, 96 % of these fixed maturities were depressed less than 20% of cost or amortized cost. The decrease in unrealized losses during the nine months ended September 30, 2024, was primarily attributable to lower interest rates and tighter credit spreads. Most of the fixed maturities depressed for twelve months or more relate to the corporate sector, RMBS, municipal bonds, and CMBS, which were primarily depressed because current rates are higher and/or market spreads are wider than at the respective purchase dates. The Company neither has an intention to sell nor does it expect to be required to sell the fixed maturities outlined in the preceding discussion. The decision to record credit losses on fixed maturities, AFS in the form of an ACL requires us to make qualitative and quantitative estimates of expected future cash flows. Mortgage Loans ACL on Mortgage Loans 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. The Company utilizes a third-party forecasting model to estimate lifetime expected credit losses at a loan level under multiple economic scenarios. The scenarios use macroeconomic data provided by an internationally recognized economics firm that generates forecasts of varying economic factors such as GDP growth, unemployment and interest rates. The economic scenarios are projected over 10 years. The first two to four years of the 10-year period assume a specific modeled economic scenario (including moderate upside, moderate recession and severe recession scenarios) and then revert to historical long-term assumptions over the remaining period. Using these economic scenarios, the forecasting model projects property-specific operating income and capitalization rates used 28 | Table of Contents Note 5 - Investments THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) to estimate the value of a future operating income stream. The operating income and the property valuations derived from capitalization rates are compared to loan payment and principal amounts to create debt service coverage ratios ("DSCRs") and LTVs over the forecast period. The Company's process also considers qualitative factors. The model overlays historical data about mortgage loan performance based on DSCRs and LTVs and projects the probability of default, amount of loss given a default and resulting expected loss through maturity for each loan under each economic scenario. Economic scenarios are probability-weighted based on a statistical analysis of the forecasted economic factors and qualitative analysis. The Company records the change in the ACL on mortgage loans based on the weighted-average expected credit losses across the selected economic scenarios. When a borrower is experiencing financial difficulty, including when foreclosure is probable, the Company measures an ACL on individual mortgage loans. The ACL is established for any shortfall between the amortized cost of the loan and the fair value of the collateral less costs to sell. Estimates of collectibility from an individual borrower require the use of significant management judgment and include the probability and timing of borrower default and loss severity estimates. In addition, cash flow projections may change based upon new information about the borrower's ability to pay and/or the value of underlying collateral such as changes in projected property value estimates. During the period in which all or a portion of the mortgage loan is determined to be uncollectible, the ACL is written off against the amortized cost. There were no mortgage loans held-for-sale as of September 30, 2024 or December 31, 2023. For both the three and nine months ended September 30, 2024, one office property mortgage loan with an amortized cost of $ 9 was granted a term extension of three years at the original rate which is a below-market rate with a borrower experiencing financial difficulties. The modified loan represents less than 1 % of the portfolio and is current and performing in conjunction with the modified terms. For the three and nine months ended September 30, 2023, the Company had no mortgage loans that have had extensions or restructurings other than what is allowable under the original terms of the contract or with borrowers experiencing financial difficulties. ACL on Mortgage Loans Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 ACL as of beginning of period $ 48 $ 41 $ 51 $ 36 Current period provision (release) — 5 ( 3 ) 10 Current period gross write-offs ( 4 ) — ( 4 ) — ACL as of September 30, $ 44 $ 46 $ 44 $ 46 The weighted-average LTV ratio of the Company’s mortgage loan portfolio was 55 % as of September 30, 2024, while the weighted-average LTV ratio at origination of these loans was 59 %. LTV ratios compare the loan amount to the value of the underlying property collateralizing the loan with property values based on appraisals updated no less than annually. Factors considered in estimating property values include, among other things, actual and expected property cash flows, geographic market data and the ratio of the property's net operating income to its value. DSCR compares a property’s net operating income to the borrower’s principal and interest payments and are updated no less than annually through reviews of underlying properties. Mortgage Loans LTV & DSCR by Origination Year as of September 30, 2024 2024 2023 2022 2021 2020 2019 & Prior Total Loan-to-value Amortized Cost Avg. DSCR Amortized Cost Avg. DSCR Amortized Cost Avg. DSCR Amortized Cost Avg. DSCR Amortized Cost Avg. DSCR Amortized Cost Avg. DSCR Amortized Cost [1] Avg. DSCR Greater than 80% $ 25 0.37 x $ — — x $ 16 1.14 x $ 37 1.03 x $ — — x $ 81 1.07 x $ 159 0.94 x 65% - 80% 60 1.29 x — — x 198 2.01 x 497 2.30 x 89 3.60 x 429 1.94 x 1,273 2.18 x Less than 65% 276 1.68 x 491 1.41 x 744 2.77 x 1,034 3.07 x 530 2.94 x 1,952 2.83 x 5,027 2.68 x Total mortgage loans $ 361 1.51 x $ 491 1.41 x $ 958 2.59 x $ 1,568 2.78 x $ 619 3.03 x $ 2,462 2.61 x $ 6,459 2.53 x [1] Amortized cost of mortgage loans excludes ACL of $ 44 . 29 | Table of Contents Note 5 - Investments THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) Mortgage Loans LTV & DSCR by Origination Year as of December 31, 2023 2023 2022 2021 2020 2019 2018 & Prior Total Loan-to-value Amortized Cost Avg. DSCR Amortized Cost Avg. DSCR Amortized Cost Avg. DSCR Amortized Cost Avg. DSCR Amortized Cost Avg. DSCR Amortized Cost Avg. DSCR Amortized Cost [1] Avg. DSCR Greater than 80% $ — — x $ 16 1.09 x $ 38 1.05 x $ — — x $ — — x $ 105 1.41 x $ 159 1.29 x 65% - 80% — — x 189 2.13 x 457 2.42 x 95 3.47 x 98 1.77 x 252 1.77 x 1,091 2.25 x Less than 65% 400 1.47 x 724 2.75 x 1,105 2.99 x 527 2.92 x 679 2.90 x 1,453 2.67 x 4,888 2.72 x Total mortgage loans $ 400 1.47 x $ 929 2.60 x $ 1,600 2.78 x $ 622 3.00 x $ 777 2.76 x $ 1,810 2.47 x $ 6,138 2.60 x [1] Amortized cost of mortgage loans excludes ACL of $ 51 . Mortgage Loans by Region September 30, 2024 December 31, 2023 Amortized Cost Percent of Total Amortized Cost Percent of Total East North Central $ 378 5.8 % $ 368 6.0 % Middle Atlantic 256 4.0 % 238 3.9 % Mountain 740 11.5 % 699 11.4 % New England 358 5.5 % 351 5.7 % Pacific 1,375 21.3 % 1,326 21.6 % South Atlantic 1,810 28.0 % 1,776 28.9 % West North Central 96 1.5 % 103 1.7 % West South Central 602 9.3 % 445 7.2 % Other [1] 844 13.1 % 832 13.6 % Total mortgage loans 6,459 100.0 % 6,138 100.0 % ACL ( 44 ) ( 51 ) Total mortgage loans, net of ACL $ 6,415 $ 6,087 [1] Primarily represents loans collateralized by multiple properties in various regions. Mortgage Loans by Property Type September 30, 2024 December 31, 2023 Amortized Cost Percent of Total Amortized Cost Percent of Total Commercial Industrial $ 2,712 42.0 % $ 2,363 38.5 % Multifamily 2,188 33.9 % 2,200 35.9 % Office 546 8.4 % 578 9.4 % Retail [1] 934 14.5 % 917 14.9 % Single Family 79 1.2 % 80 1.3 % Total mortgage loans 6,459 100.0 % 6,138 100.0 % ACL ( 44 ) ( 51 ) Total mortgage loans, net of ACL $ 6,415 $ 6,087 [1] Primarily comprised of grocery-anchored retail centers, with no exposure to regional shopping malls. Past-Due Mortgage Loans Mortgage loans are considered past due if a payment of principal or interest is not received according to the contractual terms of the loan agreement, which typically includes a grace period. As of September 30, 2024 and December 31, 2023, the Company held no mortgage loans considered past due. Mortgage Servicing The Company originates, sells and services commercial mortgage loans on behalf of third parties and recognizes servicing fee income over the period that services are performed. As of September 30, 2024, under this program, the Company serviced mortgage loans with a total outstanding principal of $ 9.9 billion, of which $ 4.7 billion was serviced on behalf of third parties and $ 5.2 billion was retained and reported in total investments on the Company's Condensed Consolidated Balance Sheets. As of December 31, 2023, the Company serviced mortgage loans with a total outstanding principal balance of $ 9.4 billion, of which $ 4.4 billion was serviced on behalf of third parties and $ 5.0 billion was retained and reported in total investments on the Company's Condensed Consolidated Balance Sheets. Servicing rights are carried at the lower of cost or fair value and were $ 0 as of September 30, 2024 and December 31, 2023, because servicing fees were market-level 30 | Table of Contents Note 5 - Investments THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) fees at origination and remain adequate to compensate the Company for servicing the loans. Variable Interest Entities The Company is engaged with various special purpose entities and other entities that are deemed to be VIEs primarily as an investor through normal investment activities or, at times, as an investment manager. A VIE is an entity that either has investors that lack certain essential characteristics of a controlling financial interest, such as simple majority kick-out rights, or lacks sufficient funds to finance its own activities without financial support provided by other entities. The Company performs ongoing qualitative assessments of its VIEs to determine whether the Company has a controlling financial interest in the VIE and therefore is the primary beneficiary. The Company is deemed to have a controlling financial interest when it has both the ability to direct the activities that most significantly impact the economic performance of the VIE and the obligation to absorb losses or right to receive benefits from the VIE that could potentially be significant to the VIE. Based on the Company’s assessment, if it determines it is the primary beneficiary, the Company consolidates the VIE in the Company’s Condensed Consolidated Financial Statements. Consolidated VIEs As of September 30, 2024 and December 31, 2023, the Company did no t hold any securities for which it is the primary beneficiary. Non-Consolidated VIEs The Company, through normal investment activities, makes passive investments in limited partnerships and other alternative investments. For these non-consolidated VIEs, the Company has determined it is not the primary beneficiary as it has no ability to direct activities that could significantly affect the economic performance of the investments. The Company’s maximum exposure to loss as of September 30, 2024 and December 31, 2023 was limited to the total carrying value of $ 3.2 billion and $ 3.0 billion, respectively, which are a portion of the investments in limited partnerships and other alternative investments in the Company's Condensed Consolidated Balance Sheets that are primarily recorded using the equity method of accounting. As of September 30, 2024 and December 31, 2023, the Company has outstanding commitments totaling $ 2.0 billion and $ 1.7 billion, respectively, whereby the Company is committed to fund these investments and may be called by the partnership during the commitment period to fund the purchase of new investments and partnership expenses. These investments are generally of a passive nature in that the Company does not take an active role in management. For further discussion of these investments, see Equity Method Investments within Note 5 - Investments of Notes to Consolidated Financial Statements included in the Company’s 2023 Form 10-K Annual Report. Furthermore, the Company makes investments in entities that sponsor affordable housing projects. Similarly, for these non-consolidated VIEs, the Company has determined it is not the primary beneficiary as it has no ability to direct activities that could significantly affect the economic performance of the investments. The Company applies the proportional amortization method to subsequently measure its investments in such qualified affordable housing projects, where costs are amortized over the period in which the investor expects to receive tax credits and the resulting amortization is recognized as a component of income tax expense on the Company's Condensed Consolidated Statements of Operations. For the three and nine months ended September 30, 2024, the Company recognized amortization of $ 1 and $ 3 , respectively, and related tax benefits of $ 3 and $ 8 , respectively. For the three and nine months ended September 30, 2023, the Company recognized amortization of $ 0 and less than $ 1 , respectively, and related tax benefits of less than $ 1 for both periods. The income tax credits and other income tax benefits are recognized in operating activities in the Condensed Consolidated Statement of Cash Flows. The carrying value of these investments, which are reported in other assets on the Company’s Condensed Consolidated Balance Sheets was $ 38 and $ 20 as of September 30, 2024, and December 31, 2023, respectively. As of September 30, 2024 and December 31, 2023, the Company has outstanding commitments related to affordable housing projects of $ 240 and $ 180 , respectively, that are contingent on various conditions precedent to funding. In addition, the Company makes passive investments in structured securities issued by VIEs for which the Company is not the manager. These investments are included in ABS, CLOs, CMBS, and RMBS and are reported in fixed maturities, AFS, and FVO securities on the Company's Condensed Consolidated Balance Sheets. The Company has not provided financial or other support with respect to these investments other than its original investment. For these investments, the Company determined it is not the primary beneficiary due to the relative size of the Company’s investment in comparison to the principal amount of the structured securities issued by the VIEs, the Company’s inability to direct the activities that most significantly impact the economic performance of the VIEs, and, where applicable, the level of credit subordination which reduces the Company’s obligation to absorb losses or right to receive benefits. The Company’s maximum exposure to loss on these investments is limited to the amount of the Company’s investment. Reverse Repurchase Agreements, Other Collateral Transactions and Restricted Investments Reverse Repurchase Agreements From time to time, the Company enters into reverse repurchase agreements where the Company purchases securities and simultaneously agrees to resell the same or substantially the same securities. The maturity of these transactions is generally within one year. The agreements require additional collateral to be transferred to the Company under specified conditions and the Company has the right to sell or re-pledge the securities received. The Company accounts for reverse repurchase agreements as collateralized financing. As of September 30, 2024 and December 31, 2023, the Company reported $ 6 and $ 10 , respectively, within short-term investments on the Condensed Consolidated Balance Sheets representing a 31 | Table of Contents Note 5 - Investments THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) receivable for the amount of cash transferred to purchase the securities. Other Collateral Transactions As of September 30, 2024 and December 31, 2023, the Company pledged collateral of $ 7 and $ 7 , respectively, of U.S. government securities or cash primarily related to certain bank loan participations committed through a limited partnership agreement. For disclosure of collateral in support of derivative transactions, refer to the Derivative Collateral Arrangements section in Note 6 - Derivatives of Notes to Condensed Consolidated Financial Statements. Other Restricted Investments The Company is required by law to deposit securities with government agencies in certain states in which it conducts business. In addition, the Company is required to hold fixed maturities and short-term investments in trust for the benefit of syndicate policyholders, hold fixed maturities in a Lloyd's of London ("Lloyd's") trust account to provide a portion of the required capital, and maintain other investments primarily consisting of overseas deposits in various countries with Lloyd's to support underwriting activities in those countries. Lloyd's is an insurance market-place operating worldwide. Lloyd's does not underwrite risks. The Company accepts risks as the sole member of Lloyd's Syndicate 1221 ("Lloyd's Syndicate"). The following table presents the components of the Company’s exposure to other restricted investments. September 30, 2024 December 31, 2023 Fair Value Fair Value Securities on deposit with government agencies $ 2,434 $ 2,339 Fixed maturities in trust for benefit of Lloyd's Syndicate policyholders 1,026 890 Short-term investments in trust for benefit of Lloyd's Syndicate policyholders 32 30 Fixed maturities in Lloyd's trust account 47 154 Other investments 60 75 Total Other Restricted Investments $ 3,599 $ 3,488 6. DERIVATIVES The Company utilizes a variety of OTC, OTC-cleared and exchange traded derivative instruments as a part of its overall risk management strategy as well as to enter into replication transactions or income generation covered call transactions. Derivative instruments are used to manage risk associated with interest rate, equity market, commodity market, credit spread, issuer default, price, and currency exchange rate or volatility. Replication transactions are used as an economical means to synthetically replicate the characteristics and performance of assets that are permissible investments under the Company’s investment policies. Strategies that Qualify for Hedge Accounting Some of the Company's derivatives satisfy hedge accounting requirements as outlined in Note 1 - Basis of Presentation and Significant Accounting Policies of Notes to Consolidated Financial Statements, included in The Hartford’s 2023 Form 10-K Annual Report. Typically, these hedging instruments include interest rate swaps and, to a lesser extent, foreign currency swaps where the terms or expected cash flows of the hedged item closely match the terms of the swap. Cash Flow Hedges Interest rate swaps are predominantly used to manage portfolio duration and better match cash receipts from assets with cash disbursements required to fund liabilities. These derivatives primarily convert interest receipts on variable-rate fixed maturity securities to fixed rates. The Company has also entered into interest rate swaps to convert the variable interest payments on the $ 500 junior subordinated debentures due 2067 to fixed interest payments. For further information, see the Junior Subordinated Debentures section within Note 14 - Debt of Notes to Consolidated Financial Statements, included in The Hartford's 2023 Form 10-K Annual Report. Foreign currency swaps are used to convert foreign currency denominated cash flows related to certain investment receipts to U.S. dollars in order to reduce cash flow fluctuations due to changes in currency rates. Non-qualifying Strategies Derivative relationships that do not qualify for hedge accounting (“non-qualifying strategies”) primarily include hedges of interest rate, foreign currency, equity, and commodity risk of certain fixed maturities and equities. In addition, hedging and replication strategies that utilize credit default swaps do not qualify for hedge accounting. The non-qualifying strategies include: Credit Contracts Credit default swaps are used to purchase credit protection on an individual entity or referenced index to economically hedge against default risk and credit-related changes in the value of fixed maturity securities. Credit default swaps are also used to assume credit risk related to an individual entity or referenced index as a part of replication transactions. These contracts require the Company to pay or receive a periodic fee in exchange for compensation from the counterparty or the Company should the referenced security issuers experience a credit event, as defined in the contract. The Company also enters into credit default swaps to terminate existing credit default swaps, thereby offsetting the changes in value of the original swap going forward. 32 | Table of Contents Note 6 - Derivatives THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) Interest Rate Swaps and Futures The Company uses interest rate swaps and futures to manage interest rate duration between assets and liabilities. In addition, the Company enters into interest rate swaps to terminate existing swaps, thereby offsetting the changes in value of the original swap going forward. As of September 30, 2024 and December 31, 2023, the notional amount of interest rate swaps in offsetting relationships was $ 344 and $ 6.6 billion, respectively. Foreign Currency Swaps and Forwards The Company enters into foreign currency swaps to convert the foreign currency exposures of certain foreign currency-denominated fixed maturity investments to U.S. dollars. Equity Index Options The Company enters into equity index options to hedge the impact of a decline in the equity markets on the investment portfolio. Derivative Balance Sheet Classification For reporting purposes, the Company has elected to offset within assets or liabilities based upon the net of the fair value amounts, income accruals and related cash collateral receivables and payables of OTC derivative instruments executed in a legal entity and with the same counterparty under a master netting agreement, which provides the Company with the legal right of offset. The following fair value amounts do not include income accruals or related cash collateral receivables and payables, which are netted with derivative fair value amounts to determine balance sheet presentation. The Company’s derivative instruments are held for risk management purposes, unless otherwise noted in the following table. The notional amount of derivative contracts represents the basis upon which payments or receipts are calculated and is presented in the table to quantify the volume of the Company’s derivative activity. Notional amounts are not necessarily reflective of credit risk. Derivative Balance Sheet Presentation Net Derivatives Asset Derivatives Liability Derivatives Notional Amount Fair Value Fair Value Fair Value Hedge Designation/ Derivative Type Sep 30, 2024 Dec. 31, 2023 Sep 30, 2024 Dec. 31, 2023 Sep 30, 2024 Dec. 31, 2023 Sep 30, 2024 Dec. 31, 2023 Cash flow hedges Interest rate swaps $ 4,100 $ 3,450 $ ( 3 ) $ ( 1 ) $ 1 $ 1 $ ( 4 ) $ ( 2 ) Foreign currency swaps 659 644 12 13 30 29 ( 18 ) ( 16 ) Total cash flow hedges 4,759 4,094 9 12 31 30 ( 22 ) ( 18 ) Non-qualifying strategies Interest rate contracts Interest rate swaps and futures 343 6,626 ( 2 ) ( 5 ) 1 — ( 3 ) ( 5 ) Foreign exchange contracts Foreign currency swaps and forwards 648 645 — — — — — — Credit contracts Credit derivatives in offsetting positions 987 998 — — 31 27 ( 31 ) ( 27 ) Equity contracts Equity index options 404 — 5 — 5 — — — Total non-qualifying strategies 2,382 8,269 3 ( 5 ) 37 27 ( 34 ) ( 32 ) Total cash flow hedges and non-qualifying strategies $ 7,141 $ 12,363 $ 12 $ 7 $ 68 $ 57 $ ( 56 ) $ ( 50 ) Balance Sheet Location Fixed maturities, AFS $ 648 $ 645 $ — $ — $ — $ — $ — $ — Other investments 907 1,662 31 ( 1 ) 31 18 — ( 19 ) Other liabilities 5,586 10,056 ( 19 ) 8 37 39 ( 56 ) ( 31 ) Total derivatives $ 7,141 $ 12,363 $ 12 $ 7 $ 68 $ 57 $ ( 56 ) $ ( 50 ) 33 | Table of Contents Note 6 - Derivatives THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) Offsetting of Derivative Assets/Liabilities The following tables present the gross fair value amounts, the offsetting amounts, and net position of derivative instruments eligible for offset in the Company's Condensed Consolidated Balance Sheets. Offsetting amounts include fair value amounts, income accruals and related cash collateral receivables and payables associated with derivative instruments that are traded under a common master netting agreement, as described in the preceding discussion. Also included in the tables are financial collateral receivables and payables, which are contractually permitted to be offset upon an event of default, although are disallowed for offsetting under U.S. GAAP. Offsetting Derivative Assets and Liabilities (i) (ii) (iii) = (i) - (ii) (iv) (v) = (iii) - (iv) Net Amounts Presented in the Statement of Financial Position Collateral Disallowed for Offset in the Statement of Financial Position Gross Amounts of Recognized Assets (Liabilities) Gross Amounts Offset in the Statement of Financial Position Derivative Assets [1] (Liabilities) [2] Accrued Interest and Cash Collateral (Received) [3] Pledged [2] Financial Collateral (Received) Pledged [4] Net Amount As of September 30, 2024 Other investments $ 68 $ 62 $ 31 $ ( 25 ) $ — $ 6 Other liabilities $ ( 56 ) $ ( 36 ) $ ( 19 ) $ ( 1 ) $ ( 18 ) $ ( 2 ) As of December 31, 2023 Other investments $ 57 $ 55 $ ( 1 ) $ 3 $ — $ 2 Other liabilities $ ( 50 ) $ ( 36 ) $ 8 $ ( 22 ) $ ( 13 ) $ ( 1 ) [1] Included in other investments in the Company's Condensed Consolidated Balance Sheets. [2] Included in other liabilities in the Company's Condensed Consolidated Balance Sheets and is limited to the net derivative payable associated with each counterparty. [3] Included in other investments in the Company's Condensed Consolidated Balance Sheets and is limited to the net derivative receivable associated with each counterparty. [4] Excludes collateral associated with exchange-traded derivative instruments. Cash Flow Hedges For derivative instruments that are designated and qualify as cash flow hedges, the gain or loss on the derivative is reported as a component of OCI and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness. Gains (Losses) Recognized in OCI Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Interest rate swaps $ 25 $ ( 8 ) $ 4 $ ( 12 ) Foreign currency swaps ( 23 ) 3 9 ( 7 ) Total $ 2 $ ( 5 ) $ 13 $ ( 19 ) 34 | Table of Contents Note 6 - Derivatives THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) Gains (Losses) Reclassified from AOCI into Income Three months ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Net Investment Income Interest Expense Net Investment Income Interest Expense Net Investment Income Interest Expense Net Investment Income Interest Expense Interest rate swaps $ ( 9 ) $ 4 $ ( 5 ) $ 4 $ ( 24 ) $ 13 $ ( 20 ) $ 11 Foreign currency swaps 3 — 2 — 9 — 7 — Total $ ( 6 ) $ 4 $ ( 3 ) $ 4 $ ( 15 ) $ 13 $ ( 13 ) $ 11 Total amounts presented on the Condensed Consolidated Statement of Operations $ 659 $ 49 $ 597 $ 50 $ 1,854 $ 149 $ 1,652 $ 150 As of September 30, 2024, the before tax deferred net losses on derivative instruments recorded in AOCI that are expected to be reclassified to earnings during the next twelve months are $ 35 . This expectation is based on the anticipated interest payments on hedged investments in fixed maturity securities and long-term debt that will occur over the next twelve months. At that time, the Company will recognize the deferred net gains (losses) as an adjustment to net investment income or interest expense, as applicable, over the term of the hedged instrument cash flows. During the three and nine months ended September 30, 2024 and 2023, the Company had no net reclassifications from AOCI to earnings resulting from the discontinuance of cash-flow hedges due to forecasted transactions that were no longer probable of occurring. Non-qualifying Strategies For non-qualifying strategies, including embedded derivatives that are required to be bifurcated from their host contracts and accounted for as derivatives, the gain or loss on the derivative is recognized currently in earnings within net realized gains (losses). Non-Qualifying Strategies Recognized within Net Realized Gains (Losses) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Interest rate contracts Interest rate swaps and futures $ 12 $ ( 71 ) $ 9 $ ( 53 ) Credit contracts Credit derivatives that purchase credit protection — ( 3 ) — ( 55 ) Equity contracts Equity index options 11 — 6 — Total [1] $ 23 $ ( 74 ) $ 15 $ ( 108 ) [1]Excludes investments that contain an embedded credit derivative for which the Company has elected the fair value option. For further discussion, see the Fair Value Option section in Note 4 - Fair Value Measurements of Notes to Condensed Consolidated Financial Statements. Credit Risk Assumed through Credit Derivatives The Company enters into credit default swaps that assume credit risk of a single entity or referenced index in order to synthetically replicate investment transactions that are permissible under the Company's investment policies. The Company will receive periodic payments based on an agreed upon rate and notional amount and will only make a payment if there is a credit event. A credit event payment will typically be equal to the notional value of the swap contract less the value of the referenced security issuer’s debt obligation after the occurrence of the credit event. A credit event is generally defined as a default on contractually obligated interest or principal payments or bankruptcy of the referenced entity. The credit default swaps in which the Company assumes credit risk may reference investment grade single corporate issuers and baskets, which include standard diversified portfolios of corporate and CMBS issuers. 35 | Table of Contents Note 6 - Derivatives THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) Credit Risk Assumed Derivatives by Type Underlying Referenced Credit Obligation(s) [1] Notional Amount [2] Fair Value Weighted Average Years to Maturity Type Average Credit Rating Offsetting Notional Amount [3] Offsetting Fair Value [3] As of September 30, 2024 Basket credit default swaps [4] Investment grade risk exposure $ 100 $ ( 1 ) 4 years CMBS Credit AAA $ 100 $ 1 Below investment grade risk exposure 392 30 4 years Corporate Credit B+ 392 ( 30 ) Below investment grade risk exposure 1 ( 1 ) Less than 1 year CMBS Credit CCC- 1 1 Total [5] $ 493 $ 28 $ 493 $ ( 28 ) As of December 31, 2023 Basket credit default swaps [4] Investment grade risk exposure $ 101 $ ( 1 ) 5 years CMBS Credit AAA $ 101 $ 1 Below investment grade risk exposure 396 24 4 years Corporate Credit B+ 396 ( 24 ) Below investment grade risk exposure 2 ( 1 ) Less than 1 year CMBS Credit CCC- 2 1 Total [5] $ 499 $ 22 $ 499 $ ( 22 ) [1] The average credit ratings are based on availability and are generally the midpoint of the available ratings among Moody’s, S&P and Fitch. If no rating is available from a rating agency, then an internally developed rating is used. [2] Notional amount is equal to the maximum potential future loss amount. These derivatives are governed by agreements and applicable law, which include collateral posting requirements. There is no additional specific collateral related to these contracts or recourse provisions included in the contracts to offset losses. [3] The Company has entered into offsetting credit default swaps to terminate certain existing credit default swaps, thereby offsetting the future changes in value of, or losses paid related to, the original swap. [4] Comprised of swaps of standard market indices of diversified portfolios of corporate and CMBS issuers referenced through credit default swaps. These swaps are subsequently valued based upon the observable standard market index. [5] Excludes investments that contain an embedded credit derivative for which the Company has elected the fair value option. For further discussion, see the Fair Value Option section in N ot e 4 - Fair Value Measurements of Notes to Condensed Consolidated Financial Statements. . Derivative Collateral Arrangements The Company enters into various collateral arrangements in connection with its derivative instruments, which require both the pledging and accepting of collateral. As of September 30, 2024 and December 31, 2023, the Company ha s pl edged cash collateral associated with derivative instruments of $ 26 and $ 25 , respectively . In general, collateral receivable is recorded in other assets or other liabilities on the Company's Condensed Consolidated Balance Sheets as determined by the Company's election to offset on the balance sheet. As of September 30, 2024 and December 31, 2023, the Company pledged securities collateral associated with derivative instruments with a fair value of $ 11 and $ 14 , respectively, which have been included in fixed maturities on the Company's Condensed Consolidated Balance Sheets. The counterparties generally have the right to sell or re-pledge these securities. In addition, as of September 30, 2024 and December 31, 2023, the Company has pledged initial margin of cash related to OTC-cleared and exchange traded derivatives with a fair value of $ 10 and $ 16 , respectively, which is recorded in other investments or other assets on the Company's Condensed Consolidated Balance Sheets. As of September 30, 2024 and December 31, 2023, the Company has pledged initial margin of securities related to OTC-cleared and exchange traded derivatives with a fair value of $ 96 and $ 112 , respectively, which are included within fixed maturities on the Company's Condensed Consolidated Balance Sheets. As of September 30, 2024 and December 31, 2023, the Company accepted cash collateral associated with derivative instruments of $ 57 and $ 49 , respectively, which was invested and recorded in the Company's Condensed Consolidated Balance Sheets in fixed maturities and short-term investments with corresponding amounts recorded in other investments or other liabilities as determined by the Company's election to offset on the balance sheet. The Company also accepted securities collateral as of September 30, 2024 and December 31, 2023, with a fair value of $ 0 for both periods, which the Company has the right to repledge or sell. As of September 30, 2024 and December 31, 2023, the Company had no repledged securities. In addition, as of September 30, 2024 and December 31, 2023, non-cash collateral accepted was held in separate custodial accounts and was not included in the Company’s Condensed Consolidated Balance Sheets . 36 | Table of Contents Note 7 - Premiums Receivable and Agents' Balances THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) 7. PREMIUMS RECEIVABLE AND AGENTS' BALANCES Premiums Receivable and Agents' Balances As of September 30, 2024 As of December 31, 2023 Premiums receivable, excluding receivables for losses within a deductible and retrospectively-rated policy premiums ("loss sensitive business") $ 5,839 $ 5,303 Receivables for loss sensitive business, by credit quality: AA 90 94 A 60 54 BBB 142 136 BB 93 84 Below BB 44 45 Total receivables for loss sensitive business 429 413 Total Premiums Receivable and Agents' Balances, Gross 6,268 5,716 ACL ( 117 ) ( 109 ) Total Premiums Receivable and Agents' Balances, Net of ACL $ 6,151 $ 5,607 ACL on Premiums Receivable and Agents' Balances Balances are considered past due when amounts that have been billed are not collected within contractually stipulated time periods. Premiums receivable and agents' balances, excluding receivables for loss sensitive business, are primarily comprised of premiums due from policyholders, which are typically collectible within one year or less. For these balances, the ACL is estimated based on an aging of receivables and recent historical credit loss and collection experience, adjusted for current economic conditions and reasonable and supportable forecasts, when appropriate. A portion of the Company's Commercial Lines business is written with large deductibles or under retrospectively-rated plans (referred to as "loss sensitive business"). Under some commercial insurance contracts with a large deductible, the Company is obligated to pay the claimant the full amount of the claim and the Company is subsequently reimbursed by the policyholder for the deductible amount. As such, the Company is subject to credit risk until reimbursement is made. Retrospectively-rated policies are utilized primarily for workers' compensation coverage, whereby the ultimate premium is adjusted based on actual losses incurred. Although the premium adjustment feature of a retrospectively-rated policy substantially reduces insurance risk for the Company, it presents credit risk to the Company. The Company’s results of operations could be adversely affected if a significant portion of such policyholders failed to reimburse the Company for the deductible amount or the amount of additional premium owed under retrospectively-rated policies. The Company manages these credit risks through credit analysis, collateral requirements, and oversight. The ACL for receivables for loss sensitive business is estimated as the amount of the receivable exposed to loss multiplied by estimated factors for probability of default and the amount of loss given a default. The probability of default is assigned based on each policyholder's credit rating, or a rating is estimated if no external rating is available. Credit ratings are reviewed and updated at least annually. The exposure amount is estimated net of collateral and other credit enhancement, considering the nature of the collateral, potential future changes in collateral values, and historical loss information for the type of collateral obtained. The probability of default factors are historical corporate defaults for receivables with similar durations estimated through multiple economic cycles. Credit ratings are forward-looking and consider a variety of economic outcomes. The loss given default factors are based on a study of historical recovery rates for general creditors through multiple economic cycles. The Company's evaluation of the required ACL for receivables for loss sensitive business considers the current economic environment as well as the probability-weighted macroeconomic scenarios similar to the approach used for estimating the ACL for mortgage loans. See Note 5 - Investments Rollforward of ACL on Premiums Receivable and Agents' Balances for the Three Months Ended September 30, 2024 September 30, 2023 Receivables Excluding Receivables for Loss Sensitive Business Receivables for Loss Sensitive Business Total Receivables Excluding Receivables for Loss Sensitive Business Receivables for Loss Sensitive Business Total Beginning ACL $ 95 $ 21 $ 116 $ 94 $ 25 $ 119 Current period provision 16 1 17 11 1 12 Current period write-offs ( 17 ) ( 1 ) ( 18 ) ( 14 ) ( 1 ) ( 15 ) Current period recoveries 2 — 2 1 — 1 Ending ACL $ 96 $ 21 $ 117 $ 92 $ 25 $ 117 37 | Table of Contents Note 7 - Premiums Receivable and Agents' Balances THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) Rollforward of ACL on Premiums Receivable and Agents' Balances for the Nine Months Ended September 30, 2024 September 30, 2023 Receivables Excluding Receivables for Loss Sensitive Business Receivables for Loss Sensitive Business Total Receivables Excluding Receivables for Loss Sensitive Business Receivables for Loss Sensitive Business Total Beginning ACL $ 89 $ 20 $ 109 $ 85 $ 24 $ 109 Current period provision 46 2 48 42 2 44 Current period write-offs ( 44 ) ( 1 ) ( 45 ) ( 41 ) ( 1 ) ( 42 ) Current period recoveries 5 — 5 6 — 6 Ending ACL $ 96 $ 21 $ 117 $ 92 $ 25 $ 117 8. REINSURANCE The Company cedes insurance risk to reinsurers to enable the Company to manage capital and risk exposure. Such arrangements do not relieve the Company of its primary liability to policyholders. Failure of reinsurers to honor their obligations could result in losses to the Company. The Company's procedures include carefully selecting its reinsurers, structuring agreements to provide collateral funds where necessary, and regularly monitoring the financial condition and ratings of its reinsurers. Reinsurance Recoverables Reinsurance recoverables include balances due from reinsurance companies and are presented net of an allowance for uncollectible reinsurance. Reinsurance recoverables include an estimate of the amount of gross losses and loss adjustment expense ("LAE") reserves that may be ceded under the terms of the reinsurance agreements, including incurred but not reported (" IBNR ") unpaid losses. The Company’s estimate of losses and LAE reserves ceded to reinsurers is based on assumptions that are consistent with those used in establishing the gross reserves for amounts the Company owes to its claimants. The Company estimates its ceded reinsurance recoverables based on the terms of any applicable facultative and treaty reinsurance, including an estimate of how IBNR losses will ultimately be ceded under reinsurance agreements. Accordingly, the Company’s estimate of reinsurance recoverables is subject to similar risks and uncertainties as the estimate of the gross reserve for unpaid losses and loss adjustment expenses. Reinsurance Recoverables by Credit Quality Indicator As of September 30, 2024 As of December 31, 2023 P&C Group Benefits Corporate Total P&C Group Benefits Corporate Total A.M. Best Financial Strength Rating A++ $ 2,284 $ — $ — $ 2,284 $ 2,398 $ — $ — $ 2,398 A+ 2,066 276 226 2,568 2,030 251 241 2,522 A 808 1 — 809 810 1 — 811 A- 624 4 — 628 653 5 — 658 B++ 2 — 2 4 2 — 3 5 Below B++ 22 — — 22 22 — — 22 Total Rated by A.M. Best 5,806 281 228 6,315 5,915 257 244 6,416 Mandatory (Assigned) and Voluntary Risk Pools 206 — — 206 208 — — 208 Captives 373 — — 373 353 — — 353 Other not rated companies 254 6 — 260 226 4 — 230 Gross Reinsurance Recoverables 6,639 287 228 7,154 6,702 261 244 7,207 Allowance for uncollectible reinsurance ( 99 ) ( 1 ) ( 2 ) ( 102 ) ( 100 ) ( 1 ) ( 2 ) ( 103 ) Net Reinsurance Recoverables $ 6,540 $ 286 $ 226 $ 7,052 $ 6,602 $ 260 $ 242 $ 7,104 Balances are considered past due when amounts that have been billed are not collected within contractually stipulated time periods, generally 30, 60 or 90 days. To manage reinsurer credit risk, a reinsurance security review committee evaluates the credit standing, financial performance, management and operational quality of each potential reinsurer. In placing reinsurance, the Company considers the nature of the risk reinsured, including the expected liability payout duration, and establishes limits tiered by reinsurer credit rating. 38 | Table of Contents Note 8 - Reinsurance THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) Where its contracts permit, the Company secures future claim obligations with various forms of collateral or other credit enhancement, including irrevocable letters of credit, secured trusts, funds held accounts and group wide offsets. As part of its reinsurance recoverable review, the Company analyzes recent developments in commutation activity between reinsurers and cedants, recent trends in arbitration and litigation outcomes in disputes between cedants and reinsurers and the overall credit quality of the Company’s reinsurers. Due to the inherent uncertainties as to collection and the length of time before reinsurance recoverables become due, it is possible that future adjustments to the Company’s reinsurance recoverables, net of the allowance, could be required, which could have a material adverse effect on the Company’s consolidated results of operations or cash flows in a particular quarter or annual period. The allowance for uncollectible reinsurance comprises an ACL and an allowance for disputed balances. The ACL is estimated as the amount of reinsurance recoverables exposed to loss multiplied by estimated factors for the probability of default and the amount of loss given a default. The probability of default is assigned based on each reinsurer's credit rating, or a rating is estimated if no external rating is available. Credit ratings are reviewed on a quarterly basis and any significant changes are reflected in an updated estimate. The probability of default factors are historical insurer and reinsurer defaults for liabilities with similar durations to the reinsured liabilities as estimated through multiple economic cycles. Credit ratings are forward- looking and consider a variety of economic outcomes. The loss given default factors are based on a study of historical recovery rates for general creditors of corporations through multiple economic cycles or, in the case of purchased annuities funding structured settlements accounted for as reinsurance, historical recovery rates for annuity contract holders. As shown in the table above, a portion of the total gross reinsurance recoverable balance relates to the Company’s participation in various mandatory (assigned) and voluntary risk pools. Reinsurance recoverables due from pools are backed by the financial position of all insurance companies participating in the pools and the credit backing the reinsurance recoverable is not limited to the financial strength of each pool. The mandatory pools generally are funded through policy assessments or surcharges and if any participant in the pool defaults, remaining liabilities are apportioned among the other members. The Company's evaluation of the required ACL for reinsurance recoverables considers the current economic environment as well as macroeconomic scenarios similar to the approach used to estimate the ACL for mortgage loans. See Note 5 - Investments. Insurance companies, including reinsurers, are regulated and hold risk-based capital (" RBC ") to mitigate the risk of loss due to economic factors and other risks. Non-U.S. reinsurers are either subject to a capital regime substantively equivalent to domestic insurers or we hold collateral to support collection of reinsurance recoverables. As a result, there is limited history of losses from insurer defaults. Allowance for Uncollectible Reinsurance for the Three and Nine Months Ended Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 P&C beginning allowance for uncollectible reinsurance $ 99 $ 107 $ 100 $ 102 Beginning allowance for disputed amounts 54 62 57 60 P&C beginning ACL 45 45 43 42 Current period provision 1 1 3 4 Current period gross write-offs ( 1 ) — ( 1 ) — P&C ending ACL 45 46 45 46 Ending allowance for disputed amounts 54 60 54 60 P&C ending allowance for uncollectible reinsurance 99 106 99 106 Group Benefits allowance for uncollectible reinsurance 1 1 1 1 Corporate allowance for uncollectible reinsurance 2 2 2 2 Total allowance for uncollectible reinsurance $ 102 $ 109 $ 102 $ 109 39 | Table of Contents Note 9 - Reserve for Unpaid Losses and Loss Adjustment Expenses THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) 9. RESERVE FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES | PROPERTY & CASUALTY INSURANCE PRODUCT RESERVES, NET OF REINSURANCE Rollforward of Liabilities for Unpaid Losses and Loss Adjustment Expenses For the nine months ended September 30, 2024 2023 Beginning liabilities for unpaid losses and loss adjustment expenses, gross $ 34,044 $ 33,083 Reinsurance and other recoverables 6,696 6,465 Beginning liabilities for unpaid losses and loss adjustment expenses, net 27,348 26,618 Provision for unpaid losses and loss adjustment expenses Current accident year 7,799 7,151 Prior accident year development [1] ( 221 ) ( 82 ) Total provision for unpaid losses and loss adjustment expenses 7,578 7,069 Change in deferred gain on retroactive reinsurance included in other liabilities [1] 87 — Payments Current accident year ( 1,852 ) ( 1,829 ) Prior accident years ( 4,078 ) ( 4,873 ) Total payments ( 5,930 ) ( 6,702 ) Foreign currency adjustment 9 3 Ending liabilities for unpaid losses and loss adjustment expenses, net 29,092 26,988 Reinsurance and other recoverables 6,603 6,465 Ending liabilities for unpaid losses and loss adjustment expenses, gross $ 35,695 $ 33,453 1. Prior accident year development for the nine months ended September 30, 2024 includes a $ 87 benefit for amortization of a deferred gain under retroactive reinsurance accounting related to the Navigators Adverse Development Cover (the "Navigator's ADC") as the Company began collection recoveries of the ceded losses from National Indemnity Company ("NICO"), a subsidiary of Berkshire Hathaway Inc, during the period. For additional information regarding the ADC reinsurance agreement, refer to "Change in Deferred Gain on Retroactive Reinsurance" discussion below. 40 | Table of Contents Note 9 - Reserve for Unpaid Losses and Loss Adjustment Expenses THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) Unfavorable (Favorable) Prior Accident Year Development For the nine months ended September 30, 2024 2023 Workers’ compensation $ ( 188 ) $ ( 174 ) Workers’ compensation discount accretion 34 32 General liability 81 39 Marine ( 1 ) ( 1 ) Package business ( 6 ) ( 18 ) Commercial property ( 7 ) 2 Professional liability ( 7 ) ( 3 ) Bond ( 22 ) 12 Assumed reinsurance 24 19 Automobile liability - Commercial Lines 26 6 Automobile liability - Personal Lines ( 13 ) — Homeowners ( 15 ) 1 Net asbestos and environmental ("A&E") reserves — — Catastrophes ( 38 ) ( 44 ) Uncollectible reinsurance — 13 Other reserve re-estimates, net ( 2 ) 34 Prior accident year development before change in deferred gain ( 134 ) ( 82 ) Change in deferred gain on retroactive reinsurance included in other liabilities [1] ( 87 ) — Total prior accident year development $ ( 221 ) $ ( 82 ) [1] The $ 87 change in deferred gain on retroactive reinsurance for the nine months ended September 30, 2024, is related to amortization of the Navigators ADC deferred gain. For additional information regarding the ADC reinsurance agreement, refer to "Change in Deferred Gain on Retroactive Reinsurance" discussion below. Re-estimates of prior accident year reserves for the nine months ended September 30, 2024 Workers’ compensation reserves were decreased within the 2016 to 2020 accident years primarily in small commercial, driven by lower than previously estimated claim severity. In addition, the 2020 accident year includes a $ 48 reduction of COVID-19 related reserves driven by favorable claim count emergence. General liability reserves were increased primarily in response to higher frequency of large losses in the 2016 to 2019 accident years as well as increases in more recent accident years, with the increase in reserves for the three months ended September 30, 2024, focused more toward the recent accident years. In addition, reserves for sexual molestation and sexual abuse claims were increased for older accident years. Lastly, reserves for extra contractual liability claims and other miscellaneous run-off lines were reduced in response to recent favorable loss activity. Professional liability reserves decreased modestly due to favorable development on directors' and officers' ("D&O") claims driven by the 2020 to 2022 accident years, partially offset by deterioration in older accident years. Bond reserves decreased due to favorable development on commercial and contract surety driven by accident years 2019 and prior. Assumed reinsurance reserves were increased due to higher reserve estimates in the Latin America surety and Latin America P&C businesses related to the 2020 to 2023 accident years. Automobile liability reserves - Commercial Lines increased primarily due to adverse loss development within accident years 2022 and 2023 driven by higher severity than estimated. Automobile liability reserves - Personal Lines were decreased primarily in response to better than anticipated accident year 2023 claim severity for property damage liability. Homeowners reserves were decreased primarily due to favorable severity impacting accident year 2023. Catastrophes reserves were decreased primarily within Commercial Lines driven by a reduction in reserves in accident years 2021 to 2022 related to favorable emergence related to various hail events, as well as favorable development in accident year 2022 related to Hurricane Ian. Other reserve re-estimates, net, included a decrease in reserves due to lower severity than expected on Personal Lines automobile physical damage for accident year 2023, offset by an increase in reserves related to unfavorable development from participation in involuntary market pools. Re-estimates of prior accident year reserves for the nine months ended September 30, 2023 Workers’ compensation reserves were decreased within the 2014 to 2019 accident years primarily in small commercial, driven by lower than previously estimated claim severity. In addition, the 2020 accident year reflects a $ 38 reduction of COVID-19 related reserves. General liability reserves were increased driven by higher frequency and estimated cost to settle large individual claims for the 2016 to 2019 accident years, partially offset by a decrease in reserves for the 2020 accident year due to favorable experience. In addition, reserves for sexual molestation and sexual abuse claims were increased for older accident years. Also included was a decrease in reserves for extra contractual liability claims and other miscellaneous run-off lines. Package business reserves decreased primarily due to lower than previously estimated property severity for accident year 2019 and 2021. Package liability is flat overall with reserve increases related to higher severity across multiple accident years offset by improvement in accident year 2020 due to favorable claim count emergence. 41 | Table of Contents Note 9 - Reserve for Unpaid Losses and Loss Adjustment Expenses THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) Commercial property reserves were flat primarily due to unfavorable development for accident year 2022 in middle & large commercial, offset by favorable development in global specialty. Professional liability reserves decreased modestly due to favorable development on directors' and officers' claims for the 2019 to 2021 accident years partially offset by deterioration on errors and omissions claims primarily for the 2018 accident year. Bond reserves were increased primarily due to unfavorable development for 2013 and prior accident years related to customs bonds. Assumed reinsurance reserves were increased due to higher reserve estimates in the specialty casualty, Latin America casualty and surety business. Automobile liability reserves - Commercial Lines increased primarily due to adverse loss development within accident years 2017 to 2019. Automobile liability reserves - Personal Lines were flat as increases for accident year 2022 from higher estimated severity and increasing attorney representation rates were fully offset by decreases, primarily within accident years 2019 to 2021, due to lower estimated severity. Catastrophes reserves were decreased primarily within Commercial Lines driven by a reduction in reserves in accident year 2022 for Hurricane Ian and accident year 2021 for Hurricane Ida. Uncollectible reinsurance was increased primarily in Commercial Lines related to a captive reinsurer and, to a lesser extent, an increase in reserves for potential collection disputes and credit concerns. Other reserve re-estimates, net, were increased primarily due to an increase in accident year 2022 Personal Lines automobile physical damage severity. Change in Deferred Gain on Retroactive Reinsurance The Company has in place an ADC reinsurance agreement that covers 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 which the Company had previously ceded the available limit. As of December 31, 2023, the Company had paid claims related to the Navigators ADC in excess of the $ 1.816 billion acquisition date reserves plus the $ 100 retention. During the three and nine months ended September 30, 2024, the Company collected recoveries from NICO and as a result amortized $ 26 and $ 87 of the deferred gain within benefits, losses and loss adjustment expenses in the three and nine month periods, respectively. As of September 30, 2024 and December 31, 2023, the deferred gain on the Navigators ADC was $ 122 and $ 209 , respectively, and is included in other liabilities on the Condensed Consolidated Balance Sheets. Settlement Agreement with Boy Scouts of America On February 14, 2022, the Company executed a final settlement agreement (the “Settlement”) with the Boy Scouts of America (“BSA”), the Local Councils, and the attorneys representing a majority of the alleged victims, pursuant to which The Hartford agreed to pay $ 787 for sexual molestation and sexual abuse claims associated with liability policies issued by various Hartford Writing Companies in the 1970s and early 1980s. In exchange for its payment, the Company receives a complete release of its policies issued to BSA and the Local Councils, as well as an injunction against further abuse claims involving BSA. All conditions precedent to the Settlement have been satisfied, including approval by the bankruptcy court and the district court, and on April 20, 2023, The Hartford paid the Settlement amount of $ 787 . Certain objecting parties have appealed the district court’s ruling and that appeal is pending before the Third Circuit. If the court approvals for the BSA’s plan of reorganization are not affirmed on appeal, it is possible that adverse outcomes, if any, could have a material adverse effect on the Company’s operating results. 42 | Table of Contents Note 9 - Reserve for Unpaid Losses and Loss Adjustment Expenses THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) | GROUP LIFE, DISABILITY AND ACCIDENT PRODUCTS Rollforward of Liabilities for Unpaid Losses and Loss Adjustment Expenses For the nine months ended September 30, 2024 2023 Beginning liabilities for unpaid losses and loss adjustment expenses, gross $ 8,274 $ 8,160 Reinsurance recoverables 254 245 Beginning liabilities for unpaid losses and loss adjustment expenses, net 8,020 7,915 Provision for unpaid losses and loss adjustment expenses Current incurral year 3,929 3,899 Prior year's discount accretion 149 149 Prior incurral year development [1] ( 460 ) ( 403 ) Total provision for unpaid losses and loss adjustment expenses [2] 3,618 3,645 Payments Current incurral year ( 1,885 ) ( 1,772 ) Prior incurral years ( 1,846 ) ( 1,798 ) Total payments ( 3,731 ) ( 3,570 ) Ending liabilities for unpaid losses and loss adjustment expenses, net 7,907 7,990 Reinsurance recoverables 279 243 Ending liabilities for unpaid losses and loss adjustment expenses, gross $ 8,186 $ 8,233 [1] Prior incurral year development represents the change in estimated ultimate incurred losses and loss adjustment expenses for prior incurral years on a discounted basis. [2] Includes unallocated loss adjustment expenses ("ULAE") of $ 130 and $ 136 for the nine months ended September 30, 2024 and 2023, respectively, that are recorded in insurance operating costs and other expenses in the Condensed Consolidated Statements of Operations . Re-estimates of prior incurral years reserves for the nine months ended September 30, 2024 Group disability - Prior period reserve estimates decreased by approximately $ 394 largely driven by long-term disability claim incidence lower than prior assumptions and favorable recoveries on prior incurral year claims, as well as a favorable change in the recovery rate assumption. Group life and accident (including group life premium waiver) - Prior period reserve estimates decreased by approximately $ 68 largely driven by favorable mortality emergence and continued low incidence in group life premium waiver. Re-estimates of prior incurral years reserves for the nine months ended September 30, 2023 Group disability- Prior period reserve estimates decreased by approximately $ 369 largely driven by group long-term disability claim incidence lower than prior assumptions and strong recoveries on prior incurral year claims. Group life and accident (including group life premium waiver)- Prior period reserve estimates decreased by approximately $ 25 largely driven by continued low incidence in group life premium waiver. Supplemental Accident & Health- Prior period reserve estimates decreased by approximately $ 9 driven by lower than previously expected claim incidence. 43 | Table of Contents Note 10 - Reserve for Future Policy Benefits THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) 10 . RESERVE FOR FUTURE POLICY BENEFITS Rollforward of Reserve for Future Policy Benefits For the nine months ended September 30, 2024 2023 Payout Annuities Life Conversions Paid-up Life Payout Annuities Life Conversions Paid-up Life Present Value of Expected Net Premiums Balance, beginning of the period $ 48 $ 47 Balance, ending of the period $ 46 $ 46 Present Value of Expected Future Policy Benefits Beginning balance at single-A rate $ 137 $ 113 $ 185 $ 140 $ 112 $ 192 Beginning adjustment for changes in single-A rate 7 ( 11 ) ( 32 ) 4 ( 14 ) ( 39 ) Beginning balance at original discount rate 130 124 217 136 126 231 Effect of changes in cash flow assumptions — 2 — ( 2 ) 1 — Effect of actual variances from expected experience 1 3 ( 1 ) 1 4 ( 1 ) Adjusted beginning balance 131 129 216 135 131 230 Interest accrual and other 5 16 5 5 14 7 Benefit Payments ( 9 ) ( 23 ) ( 19 ) ( 9 ) ( 20 ) ( 17 ) Ending balance at original discount rate 127 122 202 131 125 220 Ending adjustment for changes in single-A rate 8 ( 10 ) ( 26 ) ( 3 ) ( 20 ) ( 44 ) Ending balance at single-A rate $ 135 $ 112 $ 176 $ 128 $ 105 $ 176 Net reserve for future policy benefits $ 135 $ 66 $ 176 $ 128 $ 59 $ 176 Weighted-average duration of the reserve for future policy benefits (years) 9.0 11.6 6.6 9.0 11.4 6.1 Net Reserve for Future Policy Benefits As of September 30, 2024 2023 Payout Annuities $ 135 $ 128 Life Conversions 66 59 Paid-up Life 176 176 Deferred Profit Liability 19 20 Other 74 80 Total $ 470 $ 463 Undiscounted Expected Future Gross Premiums and Benefit Payments As of September 30, 2024 2023 Payout Annuities [1] Expected future benefit payments $ 249 $ 259 Life Conversions Expected future gross premiums $ 107 $ 116 Expected future benefit payments $ 199 $ 206 Paid-up Life [1] Expected future benefit payments $ 262 $ 285 [1] Payout Annuities and Paid-up Life have no expected future gross premiums. 44 | Table of Contents Note 10 - Reserve for Future Policy Benefits THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) Weighted-Average Interest Rates As of September 30, 2024 2023 Payout Annuities Interest accretion rate 5.6 % 5.6 % Current discount rate 4.9 % 5.9 % Life Conversions Interest accretion rate 4.3 % 4.2 % Current discount rate 5.0 % 5.9 % Paid-up Life Interest accretion rate 2.9 % 2.9 % Current discount rate 4.7 % 5.9 % The Company completed a review of cash flow assumptions in the third quarter 2024 and 2023, resulting in immaterial changes to the reserve for future policy benefits. For payout annuities, the net effect of updating cash flow assumptions was offset by a corresponding impact to the deferred profit liability. Gross premiums and interest accretion recognized on long-duration insurance policies for the nine months ended September 30, 2024 and 2023 were immaterial. 11. OTHER POLICYHOLDER FUNDS AND BENEFITS PAYABLE Other policyholder funds and benefits payable of $ 613 and $ 645 as of September 30, 2024 and 2023 respectively, included universal life long-duration contacts of $ 209 and $ 226 as well as policyholder balances related to short-duration contracts of $ 404 and $ 419 . The universal life long-duration contacts presented in the table below were economically ceded to Prudential as part of the sale of the Company's former individual life business, which closed in 2013. Universal Life Long Duration Contracts Rollforward For the nine months ended September 30, 2024 2023 Balance, beginning of the period $ 223 $ 232 Premiums Received 9 10 Policy Charges ( 18 ) ( 15 ) Surrenders and Withdrawals ( 4 ) ( 4 ) Benefit Payments ( 6 ) ( 4 ) Interest Credited 5 7 Balance, end of the period $ 209 $ 226 Weighted-average crediting rate 4.3 % 4.2 % Net Amount at Risk [1] $ 852 $ 928 Cash Surrender Value $ 207 $ 224 [1] Net amount at risk is defined as the current death benefit in excess of the current account value as of the balance sheet date. As of September 30, 2024 and 2023, universal life contracts of $ 208 and $ 225 , respectively, had crediting rates at their guaranteed minimums ranging from 4 %- 5 % . 45 | Table of Contents Note 12 - Income Taxes THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) 12. INCOME TAXES Income Tax Expense Income Tax Rate Reconciliation Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Tax provision at U.S. federal statutory rate $ 200 $ 171 $ 583 $ 449 Nontaxable investment income ( 9 ) ( 12 ) ( 31 ) ( 32 ) Other ( 6 ) 3 ( 35 ) ( 12 ) Provision for income taxes $ 185 $ 162 $ 517 $ 405 Uncertain Tax Positions Rollforward of Unrecognized Tax Benefits Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Balance, beginning of period $ 27 $ 23 $ 26 $ 22 Gross increases - tax positions in current period 1 2 2 4 Gross decreases - tax positions in current period ( 1 ) — ( 1 ) — Lapse of statute of limitations ( 4 ) — ( 4 ) ( 1 ) Balance, end of period $ 23 $ 25 $ 23 $ 25 The entire amount of unrecognized tax benefits, if recognized, would affect the effective tax rate in the period of the release. Other Tax Matters Management has assessed the need for a valuation allowance against its deferred tax assets based on tax character and jurisdiction, and as part of this assessment, the Company reduced the valuation allowance related to the deferred tax asset for foreign net operating losses from $ 12 as of December 31, 2023 to $ 0 as of September 30, 2024. In making the assessment, management considered future taxable temporary difference reversals, future taxable income exclusive of reversing temporary differences and carryovers, taxable income in open carry back years and other tax planning strategies which management views as prudent and feasible. The federal income tax audits for the Company have been completed through 2013. The acquired Navigators Group is currently under IRS audit for the pre-acquisition 2019 tax period. The statute of limitations is closed through the 2020 tax year with the exception of net operating loss carryforwards utilized in open tax years and the Navigators pre-acquisition 2019 tax period. Management believes that adequate provision has been made in the Company's Condensed Consolidated Financial Statements for any potential adjustments that may result from tax examinations and other tax-related matters for all open tax years. 13. DEBT Shelf Registrations On September 23, 2024, the Company filed with the Securities and Exchange Commission an automatic shelf registration statement (Registration No. 333-282288) for the potential offering and sale of debt and equity securities. The registration statement allows for the following types of securities to be offered: debt securities, junior subordinated debt securities, guarantees, preferred stock, common stock, depositary shares, warrants, stock purchase contracts, and stock purchase units. Because The Hartford is a well-known seasoned issuer, as defined in Rule 405 under the Securities Act of 1933, the registration statement became effective immediately upon filing and The Hartford may offer and sell an unlimited amount of securities under the registration statement during the three-year life of the registration statement. Lloyd's Letter of Credit Facility On October 21, 2024, The Hartford amended and restated its committed credit facility with a syndicate of lenders (the “Lloyd’s Facility”). The purpose of this facility is to issue letters of credit that may be treated as Funds at Lloyd's to support underwriting capacity provided by the Hartford Corporate Underwriters Limited to the Lloyd’s syndicate 1221 for the 2025 and 2026 underwriting years of account (and prior open years). The amended and restated Lloyd’s Facility has two tranches, with one tranche extending a $ 74 commitment and the other tranche extending a £ 79 million ($ 106 as of September 30, 2024). The term of the facility is two years. As of September 30, 2024, letters of credit with an aggregate face amount of $ 74 and £ 73 million, or $ 98 , were outstanding under the Lloyd's Facility. As of December 31, 2023, letters of credit with an aggregate face amount of $ 74 and £ 79 million, or $ 101 , were outstanding under the Lloyd's Facility. Among other covenants, the Lloyd's Facility contains financial covenants regarding The Hartford’s consolidated net worth and financial leverage. As of September 30, 2024 and December 31, 2023, The Hartford was in compliance with all financial covenants of the facility. 46 | Table of Contents Note 14 - Commitments and Contingencies THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) 14. COMMITMENTS AND CONTINGENCIES Management evaluates each contingent matter separately. A loss is recorded if probable and reasonably estimable. Management establishes liabilities for these contingencies at its “best estimate,” or, if no one number within the range of possible losses is more probable than any other, the Company records an estimated liability at the low end of the range of losses. Litigation The Hartford is involved in claims litigation arising in the ordinary course of business, both as a liability insurer defending or providing indemnity for third-party claims brought against insureds and as an insurer defending coverage claims brought against it. The Hartford accounts for such activity through the establishment of unpaid loss and loss adjustment expense reserves. Subject to the uncertainties related to sexual molestation and sexual abuse claims, including those discussed in Note 9 - Reserve for Unpaid Losses and Loss Adjustment Expenses of this Form 10-Q and in Note 11 - Reserve for Unpaid Losses and Loss Adjustment Expenses, of the Company's Annual Report on Form 10-K for the year ended December 31, 2023, and in the following discussion under the caption “COVID-19 Pandemic Business Income Insurance Litigation” and under the caption “Run-off Asbestos and Environmental Claims,” management expects that the ultimate liability, if any, with respect to such ordinary-course claims litigation, after consideration of provisions made for potential losses and costs of defense, will not be material to the consolidated financial condition, results of operations or cash flows of The Hartford. The Hartford is also involved in other kinds of legal actions, some of which assert claims for substantial amounts. In addition to the matter described below, these actions include putative class actions seeking certification of a state or national class. Such putative class actions have alleged, for example, underpayment of claims or improper sales or underwriting practices in connection with various kinds of insurance policies, such as personal and commercial automobile and property. The Hartford also is involved in individual actions in which punitive damages are sought, such as claims alleging bad faith in the handling of insurance claims or other allegedly unfair or improper business practices. Management expects that the ultimate liability, if any, with respect to such lawsuits, after consideration of provisions made for estimated losses, will not be material to the consolidated financial condition of The Hartford. Nonetheless, given the large or indeterminate amounts sought in certain of these actions, and the inherent unpredictability of litigation, the outcome in certain matters could, from time to time, have a material adverse effect on the Company’s results of operations or cash flows in particular quarterly or annual periods. COVID-19 Pandemic Business Income Insurance Litigation Like many others in the property and casualty insurance industry, beginning in April 2020, various direct and indirect subsidiaries of the Company (collectively the "Hartford Writing Companies”), and in some instances the Company itself, were named as defendants in lawsuits seeking insurance coverage under commercial insurance policies issued by the Hartford Writing Companies for alleged losses resulting from the shutdown or suspension of their businesses due to the spread of COVID-19. More than 300 such lawsuits were filed, including numerous lawsuits purportedly filed on behalf of broad nationwide or statewide classes of policyholders. Although the allegations vary, the plaintiffs generally seek a declaration of insurance coverage, damages for breach of contract in unspecified amounts, interest, and attorneys' fees. Many of the lawsuits also allege that the insurance claims were denied in bad faith or otherwise in violation of state laws and seek extra-contractual or punitive damages. Some of the lawsuits also allege that the Hartford Writing Companies engaged in unfair business practices by collecting or retaining excess premium. The Company and its subsidiaries deny the allegations and maintain that based on the terms of the applicable insurance policies, they have no coverage obligations with respect to these suits for business income allegedly lost by the plaintiffs due to the COVID-19 pandemic. Specifically, the policies generally require direct physical loss or damage to insured property and/or contain exclusions for any loss caused directly or indirectly by the presence, growth, proliferation, spread or activity of a virus, subject to a narrow set of exceptions not applicable in connection with this pandemic, and which often contain a pollution and contamination exclusion that, among other things, expressly excludes from coverage any loss caused by material that threatens human health or welfare. The Company has obtained numerous dismissals in its favor and affirmances on appeal and continues to vigorously defend the remaining suits in the trial and appellate courts. Nevertheless, given the inherent difficulty in predicting litigation outcomes, the COVID-19 pandemic business income coverage lawsuits still present uncertainties and contingencies that are not yet fully known, including whether additional claims or lawsuits could be filed, the extent to which any state or nationwide classes will be certified, and the size and scope of any such classes. In addition, business income calculations depend upon a wide range of factors that are particular to the circumstances of each individual policyholder and, here, almost none of the plaintiffs have submitted proofs of loss or otherwise quantified or factually supported any allegedly covered loss to allow management to reasonably estimate the possible loss or range of loss, if any. Thus, despite the high percentage of favorable outcomes to date in both the trial and appellate courts, given the lack of certainty around the remaining lawsuits, the indeterminate amounts sought, and the inherent unpredictability of litigation, it is possible that adverse outcomes, if any, in the aggregate, could have a material adverse effect on the Company’s consolidated operating results or liquidity. 47 | Table of Contents Note 14 - Commitments and Contingencies THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) Run-off Asbestos and Environmental Claims The Company continues to receive A&E claims. Asbestos claims relate primarily to bodily injuries asserted by people who came in contact with asbestos or products containing asbestos. Environmental claims relate primarily to pollution and related clean-up costs. The vast majority of the Company's exposure to A&E relates to accident years prior to 1986 that are reported in Property & Casualty Other Operations ("Run-off A&E"). In addition, since 1986, the Company has written A&E exposures under general liability policies and pollution liability under homeowners policies, which are reported in the Commercial Lines and Personal Lines segments, respectively. Prior to 1986, the Company wrote several different categories of insurance contracts that may cover A&E claims. First, the Company wrote primary policies providing the first layer of coverage in an insured’s liability program. Second, the Company wrote excess and umbrella policies providing higher layers of coverage for losses that exhaust the limits of underlying coverage. Third, the Company acted as a reinsurer assuming a portion of those risks assumed by other insurers writing primary, excess, umbrella and reinsurance coverages. Significant uncertainty limits the ability of insurers and reinsurers to estimate the ultimate reserves necessary for unpaid gross losses and expenses related to environmental and asbestos claims. The degree of variability of gross reserve estimates for these exposures is significantly greater than for other more traditional exposures. In the case of the reserves for asbestos exposures, factors contributing to the high degree of uncertainty include inadequate loss development patterns, plaintiffs’ expanding theories of liability, the risks inherent in major litigation, and inconsistent and emerging legal doctrines with respect to the underlying claims and with respect to the Company's coverage obligations. Furthermore, over time, insurers, including the Company, have experienced significant changes in the rate at which asbestos claims are brought, the claims experience of particular insureds, and the value of claims, making predictions of future exposure from past experience uncertain. Plaintiffs and insureds also have sought to use bankruptcy proceedings, including “pre-packaged” bankruptcies, to accelerate and increase loss payments by insurers. In addition, some policyholders have asserted new classes of claims for coverages to which an aggregate limit of liability may not apply. Further uncertainties include insolvencies of other carriers, insolvencies of insureds and unanticipated developments pertaining to the Company’s ability to recover reinsurance for A&E claims. Management believes these issues are not likely to be resolved in the near future. In the case of the reserves for environmental exposures, factors contributing to the high degree of uncertainty include expanding theories of liability and damages against insureds, emerging risks such as per-and polyfluoroalkyl substances ("PFAS"), the risks inherent in major litigation, inconsistent and emerging legal doctrines concerning the existence and scope of coverage for environmental claims, and the scope and level of complexity of the remediation required by regulators. The reporting pattern for assumed reinsurance claims, including those related to A&E claims, is much longer than for direct claims. In many instances, it takes months or years to determine that the policyholder’s own obligations have been met and how the reinsurance in question may apply to such claims. The delay in reporting reinsurance claims and exposures adds to the uncertainty of estimating the related reserves. It is also not possible to predict changes in the legal and legislative environment and their effect on the future development of A&E claims. Given the factors described above, the Company believes the actuarial tools and other techniques it employs to estimate the ultimate cost of claims for more traditional kinds of insurance exposure are less precise in estimating reserves for A&E exposures. For this reason, the Company principally relies on exposure-based analysis to estimate the ultimate costs of these claims, both gross and net of reinsurance, and regularly evaluates new account information in assessing its potential A&E exposures. The Company supplements this exposure-based analysis with evaluations of the Company’s historical direct net loss and expense paid and reported experience, and net loss and expense paid and reported experience by calendar and/or report year, to assess any emerging trends, fluctuations or characteristics suggested by the aggregate paid and reported activity. While the Company believes that its current A&E reserves are appropriate, significant uncertainties limit the ability of insurers and reinsurers to estimate the ultimate reserves necessary for unpaid losses and related expenses. The ultimate liabilities, thus, could exceed the currently recorded reserves, and any such additional liability, while not estimable now, could be material to The Hartford’s consolidated operating results or liquidity. For its Run-off A&E claims, as of September 30, 2024, the Company reported $ 133 of net A&E reserves, including the benefit of losses ceded to an A&E ADC with NICO (collectively the "A&E ADC"). In addition, the Company has recorded a $ 788 deferred gain within other liabilities for losses economically ceded to NICO but for which the benefit is not recognized in earnings until later periods. While the Company believes that its current Run-off A&E reserves are appropriate, significant uncertainties limit our ability to estimate the ultimate reserves necessary for unpaid losses and related expenses. The ultimate liabilities, thus, could exceed the currently recorded reserves, and any such additional liability, while not reasonably estimable now, could be material to The Hartford's consolidated operating results or liquidity. The Company’s A&E ADC reinsurance agreement reinsures substantially all A&E reserve development for 2016 and prior accident years, including Run-off A&E and A&E reserves included in Commercial Lines and Personal Lines. The A&E ADC has a coverage limit of $ 1.5 billion above the Company’s existing net A&E reserves as of December 31, 2016 of approximately $ 1.7 billion. As of September 30, 2024 , the Company has incurred $ 1,438 in cumulative adverse development on A&E reserves that have been ceded under the A&E ADC treaty, leaving $ 62 of coverage available for future adverse net reserve development, if any. Cumulative adverse 48 | Table of Contents Note 14 - Commitments and Contingencies THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) development of A&E claims for accident years 2016 and prior could ultimately exceed the $ 1.5 billion treaty limit in which case any adverse development in excess of the treaty limit would be absorbed as a charge to earnings by the Company. In these scenarios, the effect of these charges could be material to the Company’s consolidated operating results or liquidity. For more information on the A&E ADC, refer to Note 11 - Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Consolidated Financial Statements included in the Company's 2023 Form 10-K Annual Report. Derivative Commitments Certain of the Company’s derivative agreements contain provisions that are tied to the financial strength ratings, as set by nationally recognized statistical agencies, of the individual legal entity that entered into the derivative agreement. If the legal entity’s financial strength were to fall below certain ratings, the counterparties to the derivative agreements could, in certain instances, terminate the agreements and demand immediate settlement of all outstanding derivative positions traded under each impacted bilateral agreement. The settlement amount is determined by netting the derivative positions transacted under each agreement. If the termination rights were to be exercised by the counterparties, it could impact the legal entity’s ability to conduct hedging activities by increasing the associated costs and decreasing the willingness of counterparties to transact with the legal entity. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that are in a net liability position as of September 30, 2024 was $ 52 for which the legal entities have posted collateral of $ 36 in the normal course of business. Based on derivative contractual terms as of September 30, 2024, a downgrade of the current financial strength ratings by either Moody's or S&P would no t require additional assets to be posted as collateral. This requirement could change as a result of changes in our hedging activities or to the extent changes in contractual terms are negotiated. The nature of the additional collateral that we would post, if required, would be primarily in the form of U.S. Treasury bills, U.S. Treasury notes and government agency securities. 15. EQUITY Equity Repurchase Program During the nine months ended September 30, 2024 and 2023, the Company repurchased $ 1.1 billion ( 11.0 million shares) and $ 1.05 billion ( 14.6 million shares), respectively, of common stock under the $ 3.0 billion share repurchase authorization that is effective until December 31, 2024 as authorized by the Board of Directors. In addition to this authorization, in July 2024, the Board of Directors approved a share repurchase authorization for up to $ 3.3 billion effective from August 1, 2024 to December 31, 2026. As of September 30, 2024, the Company has $ 3.5 billion remaining for equity repurchases under both these current share repurchase programs. During the period October 1, 2024 through October 23, 2024, the Company repurchased $ 115 ( 1.0 million common shares) under these repurchase programs. 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 . 16. CHANGES IN AND RECLASSIFICATIONS FROM ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) Changes in AOCI, Net of Tax for the Three Months Ended September 30, 2024 Changes in Net Unrealized Gain (Loss) on Fixed Maturities, AFS Unrealized Losses on Fixed Maturities, AFS with ACL Net Gain (Loss) on Cash Flow Hedging Instruments Foreign Currency Translation Adjustments Liability for Future Policy Benefits Adjustments Pension and Other Postretirement Plan Adjustments AOCI, net of tax Beginning balance $ ( 1,732 ) $ ( 7 ) $ 30 $ 35 $ 35 $ ( 1,429 ) $ ( 3,068 ) OCI before reclassifications 1,292 2 2 8 ( 20 ) — 1,284 Amounts reclassified from AOCI 50 1 2 — — 9 62 OCI, before tax 1,342 3 4 8 ( 20 ) 9 1,346 Income tax benefit (expense) ( 281 ) ( 1 ) ( 1 ) ( 2 ) 4 ( 2 ) ( 283 ) OCI, net of tax 1,061 2 3 6 ( 16 ) 7 1,063 Ending balance $ ( 671 ) $ ( 5 ) $ 33 $ 41 $ 19 $ ( 1,422 ) $ ( 2,005 ) 49 | Table of Contents Note 16 - Accumulated Other Comprehensive Income (Loss) THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) Changes in AOCI, Net of Tax for the Nine Months Ended September 30, 2024 Changes in Net Unrealized Gain (Loss) on Fixed Maturities, AFS Unrealized Losses on Fixed Maturities, AFS with ACL Net Gain (Loss) on Cash Flow Hedging Instruments Foreign Currency Translation Adjustments Liability for Future Policy Benefits Adjustments Pension and Other Postretirement Plan Adjustments AOCI, net of tax Beginning balance $ ( 1,482 ) $ ( 8 ) $ 21 $ 37 $ 25 $ ( 1,442 ) $ ( 2,849 ) OCI before reclassifications 900 3 13 5 ( 8 ) — 913 Amounts reclassified from AOCI 127 1 2 — — 25 155 OCI, before tax 1,027 4 15 5 ( 8 ) 25 1,068 Income tax benefit (expense) ( 216 ) ( 1 ) ( 3 ) ( 1 ) 2 ( 5 ) ( 224 ) OCI, net of tax 811 3 12 4 ( 6 ) 20 844 Ending balance $ ( 671 ) $ ( 5 ) $ 33 $ 41 $ 19 $ ( 1,422 ) $ ( 2,005 ) Reclassifications from AOCI Three Months Ended September 30, 2024 Nine Months Ended September 30, 2024 Affected Line Item in the Condensed Consolidated Statement of Operations Net Unrealized Gain (Loss) on Fixed Maturities, AFS Fixed Maturities, AFS $ ( 50 ) $ ( 127 ) Net realized gains (losses) ( 50 ) ( 127 ) Total before tax ( 11 ) ( 27 ) Income tax expense $ ( 39 ) $ ( 100 ) Net income Unrealized Losses on Fixed Maturities, AFS with ACL Fixed Maturities, AFS $ ( 1 ) $ ( 1 ) Net realized gains (losses) ( 1 ) ( 1 ) Total before tax — — Income tax expense $ ( 1 ) $ ( 1 ) Net income Net Gain (Loss) on Cash Flow Hedging Instruments Interest rate swaps $ ( 9 ) $ ( 24 ) Net investment income Interest rate swaps 4 13 Interest expense Foreign currency swaps 3 9 Net investment income ( 2 ) ( 2 ) Total before tax — — Income tax expense $ ( 2 ) $ ( 2 ) Net income Pension and Other Postretirement Plan Adjustments Amortization of prior service credit $ 2 $ 5 Insurance operating costs and other expenses Amortization of actuarial loss ( 11 ) ( 30 ) Insurance operating costs and other expenses ( 9 ) ( 25 ) Total before tax ( 2 ) ( 5 ) Income tax expense $ ( 7 ) $ ( 20 ) Net income Total amounts reclassified from AOCI $ ( 49 ) $ ( 123 ) Net income 50 | Table of Contents Note 16 - Accumulated Other Comprehensive Income (Loss) THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) Changes in AOCI, Net of Tax for the Three Months Ended September 30, 2023 Changes in Net Unrealized Gain (Loss) on Fixed Maturities, AFS Unrealized Losses on Fixed Maturities, AFS with ACL Net Gain (Loss) on Cash Flow Hedging Instruments Foreign Currency Translation Adjustments Liability for Future Policy Benefits Adjustments Pension and Other Postretirement Plan Adjustments AOCI, net of tax Beginning balance $ ( 2,277 ) $ ( 10 ) $ 31 $ 36 $ 32 $ ( 1,336 ) $ ( 3,524 ) OCI before reclassifications ( 876 ) ( 1 ) ( 5 ) ( 1 ) 19 1 ( 863 ) Amounts reclassified from AOCI 26 2 ( 1 ) — — 7 34 OCI, before tax ( 850 ) 1 ( 6 ) ( 1 ) 19 8 ( 829 ) Income tax benefit (expense) 179 — 2 — ( 4 ) ( 2 ) 175 OCI, net of tax ( 671 ) 1 ( 4 ) ( 1 ) 15 6 ( 654 ) Ending balance $ ( 2,948 ) $ ( 9 ) $ 27 $ 35 $ 47 $ ( 1,330 ) $ ( 4,178 ) Changes in AOCI, Net of Tax for the Nine Months Ended September 30, 2023 Changes in Net Unrealized Gain (Loss) on Fixed Maturities, AFS Unrealized Losses on Fixed Maturities, AFS with ACL Net Gain (Loss) on Cash Flow Hedging Instruments Foreign Currency Translation Adjustments Liability for Future Policy Benefits Adjustments Pension and Other Postretirement Plan Adjustments AOCI, net of tax Beginning balance $ ( 2,594 ) $ ( 7 ) $ 40 $ 31 $ 35 $ ( 1,346 ) $ ( 3,841 ) OCI before reclassifications ( 522 ) ( 7 ) ( 19 ) 5 15 — ( 528 ) Amounts reclassified from AOCI 74 4 2 — — 20 100 OCI, before tax ( 448 ) ( 3 ) ( 17 ) 5 15 20 ( 428 ) Income tax benefit (expense) 94 1 4 ( 1 ) ( 3 ) ( 4 ) 91 OCI, net of tax ( 354 ) ( 2 ) ( 13 ) 4 12 16 ( 337 ) Ending balance $ ( 2,948 ) $ ( 9 ) $ 27 $ 35 $ 47 $ ( 1,330 ) $ ( 4,178 ) 51 | Table of Contents Note 16 - Accumulated Other Comprehensive Income (Loss) THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) Reclassifications from AOCI Three Months Ended September 30, 2023 Nine Months Ended September 30, 2023 Affected Line Item in the Condensed Consolidated Statement of Operations Net Unrealized Gain (Loss) on Fixed Maturities, AFS Fixed Maturities, AFS $ ( 26 ) $ ( 74 ) Net realized gains (losses) ( 26 ) ( 74 ) Total before tax ( 5 ) ( 16 ) Income tax expense $ ( 21 ) $ ( 58 ) Net income Unrealized Losses on Fixed Maturities, AFS with ACL Fixed Maturities, AFS $ ( 2 ) $ ( 4 ) Net realized gains (losses) ( 2 ) ( 4 ) Total before tax — ( 1 ) Income tax expense $ ( 2 ) $ ( 3 ) Net income Net Gain (Loss) on Cash Flow Hedging Instruments Interest rate swaps $ ( 5 ) $ ( 20 ) Net investment income Interest rate swaps 4 11 Interest expense Foreign currency swaps 2 7 Net investment income 1 ( 2 ) Total before tax — — Income tax expense $ 1 $ ( 2 ) Net income Pension and Other Postretirement Plan Adjustments Amortization of prior service credit $ 2 $ 5 Insurance operating costs and other expenses Amortization of actuarial loss ( 9 ) ( 25 ) Insurance operating costs and other expenses ( 7 ) ( 20 ) Total before tax ( 1 ) ( 4 ) Income tax expense $ ( 6 ) $ ( 16 ) Net income Total amounts reclassified from AOCI $ ( 28 ) $ ( 79 ) Net income 17. EMPLOYEE BENEFIT PLANS The Company’s employee benefit plans are described in Note 19 - Employee Benefit Plans of Notes to Consolidated Financial Statements included in The Hartford’s 2023 Form 10-K Annual Report. Net periodic cost (benefit) is recognized in insurance operating costs and other expenses in the Condensed Consolidated Statement of Operations. Based on the funded status of the U.S. qualified defined benefit pension plan, the Company does not anticipate contributing to the plan in 2024. Net Periodic Cost (Benefit) Pension Benefits Other Postretirement Benefits Three Months Ended September 30, Nine Months Ended September 30, Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 2024 2023 2024 2023 Service cost $ — $ 1 $ 1 $ 3 $ — $ — $ — $ — Interest cost 44 45 132 135 2 1 5 5 Expected return on plan assets ( 58 ) ( 58 ) ( 173 ) ( 176 ) ( 1 ) — ( 1 ) ( 1 ) Amortization of prior service credit — — — — ( 2 ) ( 2 ) ( 5 ) ( 5 ) Amortization of actuarial loss 9 7 26 21 2 2 4 4 Net periodic cost (benefit) $ ( 5 ) $ ( 5 ) $ ( 14 ) $ ( 17 ) $ 1 $ 1 $ 3 $ 3 52 | Table of Contents Note 18 - Restructuring and Other Costs THE HARTFORD FINANCIAL SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 18. RESTRUCTURING AND OTHER COSTS 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. Hartford Next reduced annual insurance operating costs and other expenses through reduction of the Company's headcount, investment in information technology ("IT") to further enhance our capabilities, and other activities. The activities were substantially completed as of December 31, 2023. Termination benefits related to workforce reductions and professional fees are included within restructuring and other costs in the Condensed Consolidated Statement of Operations. Subsequent to September 30, 2024, the Company expects to incur additional costs including amortization of right of use assets and other lease exit costs, other IT costs to retire applications and other expenses. Total restructuring and other costs are expected to be approximately $ 127 , before tax, and will be recognized in the Corporate category and not allocated to the reportable segments. Restructuring and Other Costs, Before Tax Incurred in the Three Months Ended September 30, Incurred in the Nine Months Ended September 30, Cumulative Incurred Through September 30, 2024 Total Amount Expected to be Incurred 2024 2023 2024 2023 Severance benefits $ — $ ( 2 ) $ — $ ( 5 ) $ 35 $ 35 IT costs — 2 — 4 25 25 Professional fees and other expenses 1 1 2 5 67 67 Total restructuring and other costs, before tax $ 1 $ 1 $ 2 $ 4 $ 127 $ 127 53 | Table of Contents Index to MD&A Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations