Hartford Financial Services Group Inc-The Stock

The Hartford Financial Services Group, Inc. (HFSG) and its subsidiaries (The Hartford) provide property and casualty ('P&C') 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.

The company sells diverse and innovative products through multiple distribution channels to individuals and businesses and is considered a leading property and casualty and group benefits insurer. The Hartford Stag logo is one of the most recognized symbols in the financial services industry.

Strategy

The company's strategy to maximize value creation for all stakeholders focuses on advancing underwriting excellence, emphasizing digital capabilities, maximizing distribution channels, optimizing organizational efficiency, and embedding sustainability principles into the company's business to drive value creation while impacting society at large.

The company endeavors to maintain and enhance its position as a market leader by leveraging the company's core strengths of underwriting excellence, risk management, claims, product development and distribution. The company is investing in end-to-end transformation, advancing data, analytics, and digital capabilities across the organization to improve customer experience and strengthen the company's existing competitive advantages.

Strategic Priorities

The company's strategy remains consistent and the company is focused on the following priorities across the company's businesses:

Advancing leading underwriting capabilities across the company's portfolio to offer expanded products and services;

Embracing a culture of growth and innovation and cross-enterprise collaboration;

Emphasizing digital capabilities and data science that enhance the customer experience and improve underwriting and claims decision making;

Maximizing distribution channels and product breadth to increase market share; and

Optimizing organizational efficiency with a focus on continuous improvement.

Reporting Segments

The Hartford conducts business principally in five reporting segments, including Commercial Lines, Personal Lines, Property & Casualty (P&C) Other Operations, Group Benefits, and Hartford Funds, as well as a Corporate category.

Commercial Lines segment

Principal Products and Services

Automobile: Covers damage to a business's fleet of vehicles due to collision or other perils (automobile physical damage). In addition to first party automobile physical damage, commercial automobile covers liability for bodily injuries and property damage suffered by third parties and losses caused by uninsured or under-insured motorists.

Property: Covers the building a business owns or leases as well as its personal property, including tools and equipment, inventory, and furniture. A commercial property insurance policy covers losses resulting from fire, wind, hail, earthquake, theft and other covered perils, including coverage for assets such as accounts receivable and valuable papers and records. Commercial property may include specialized equipment insurance, which provides coverage for loss or damage resulting from the mechanical breakdown of boilers and machinery.

General Liability: Covers a business in the event it is sued for causing harm to a person and/or damage to property. General liability insurance covers third-party claims arising from accidents occurring on the insured's premises or arising out of their operations. General liability insurance may also cover losses arising from product liability and provides replacement of lost income due to an event that interrupts business operations.

Marine: Encompasses various ocean and inland marine coverages, including cargo, craft, hull, specie, transport and liability, among others.

Package Business: Covers both property and general liability damages.

Workers' Compensation: Covers employers for losses incurred due to employees sustaining an injury, illness or disability in connection with their work. Benefits paid under workers' compensation policies may include reimbursement of medical care costs, replacement income, compensation for permanent injuries and benefits to survivors. Workers' compensation is provided under both guaranteed cost policies (coverage for a fixed premium) and loss sensitive policies where premiums are adjustable based on the loss experience of the employer.

Professional Liability: Covers liability arising from directors and officers acting in their official capacity and liability for errors and omissions committed by professionals and others. Coverage may also provide employment practices insurance relating to allegations of wrongful termination and discrimination.

Bond: Encompasses fidelity and surety insurance, including commercial surety, contract surety and fidelity bonds. Commercial surety includes bonds that insure non-performance by contractors, license and permit bonds to help meet government-mandated requirements and probate and judicial bonds for fiduciaries and civil court proceedings. Contract surety bonds may include payment and performance bonds for contractors. Fidelity bonds may include ERISA bonds related to the handling of retirement plan assets and bonds protecting against employee theft or fraud. The company also provides credit and political risk insurance ('CPRI') offered to clients with global operations.

Assumed Reinsurance: Includes assumed reinsurance of property, liability, surety, credit and political, marine and agriculture risks throughout the world but principally in Europe and the Americas. Business principally provides cover on broad books of business (i.e. treaty), as opposed to individual risks (i.e. facultative).

Through its three lines of business, small commercial, middle & large commercial, and global specialty, Commercial Lines offers its products and services to businesses in the United States ('U.S.') and internationally. Commercial Lines generally consists of products written for small businesses and middle market companies, as well as national and multi-national accounts, largely distributed through retail agents and brokers, wholesale agents and global and specialty insurance and reinsurance brokers. The majority of Commercial Lines written premium is generated by small commercial and middle market lines, which provide coverage options and customized pricing based on the policyholder's individual risk characteristics. Small commercial and middle market lines within middle & large commercial are generally referred to as standard commercial lines.

Small commercial provides coverages for small businesses, which the company generally considers to be businesses with an annual payroll under $20, revenues under $50 and property values less than $20 per location. Primary coverages provided include workers' compensation, property, general liability, and commercial automobile. Within small commercial, both property and general liability coverages are offered under a single package policy, marketed under the Spectrum name. Small commercial also provides excess and surplus lines coverage to small businesses, including umbrella, general liability, property, and other coverages.

Middle & large commercial business provides insurance coverages to medium-sized and national accounts businesses, which are companies whose payroll, revenue and property values exceed the small business definition. In addition to offering standard commercial lines products, including workers' compensation, property, general liability and commercial automobile products, middle & large commercial includes program business which provides tailored programs, primarily to customers with common risk characteristics. On national accounts, a significant portion of the business is written through large deductible programs. Other programs written within middle & large commercial are retrospectively-rated where the ultimate premium collected from the insured is adjusted based on how incurred losses for the policy year develop over time, subject to a minimum and maximum premium. Also within middle & large commercial, the company writes captive programs business, which provides tailored programs to those seeking a loss sensitive solution where premiums are adjustable based on loss experience. In addition, through business partners, middle & large commercial offers business insurance coverages to exporters and other U.S. companies with a physical presence overseas.

Lines of business written by small commercial and middle & large commercial are subject to rate regulation and written pricing increases or decreases that are partly in response to loss cost trends. Workers' compensation rates are based on loss experience and are informed by data submitted through the National Council on Compensation Insurance ('NCCI'). Workers' compensation rates have been under downward pressure for the industry due to favorable loss cost trends in recent years, including due to lower claim frequency that occurred during the pandemic.

Global specialty provides a variety of customized insurance products, including property, liability, marine, professional liability, and bond. The vast majority of the business written by the company's Navigators Group insurance subsidiaries is reported in the global specialty business unit.

Marketing and Distribution

Commercial Lines provides insurance products and services through the company's regional offices, branches and sales and policyholder service centers throughout the United States and, to a lesser extent, overseas, principally in the United Kingdom. The products are marketed and distributed using independent retail agents and brokers, wholesale agents and global and specialty insurance and reinsurance brokers, with business also sold direct-to-consumer. In addition, the company offers insurance products to customers of payroll service providers through its relationships with major national payroll companies in the United States and to members of affinity organizations. As the sole corporate member of Lloyd's Syndicate 1221 ('Lloyd's Syndicate'), the company has the exclusive right to underwrite business up to an approved level of premium in the Lloyd's of London ('Lloyds') market.

In the United States, independent agents, brokers and wholesalers are consolidating and this trend is expected to continue. This will likely result in a larger proportion of written premium being concentrated among fewer agents, brokers and wholesalers. These distribution partners are leveraging data and analytics for bargaining power.

Personal Lines segment

Principal Products and Services

Automobile: Covers damage to an individual insured's own vehicle due to collision or other perils and is referred to as automobile physical damage. In addition to first party automobile physical damage, automobile insurance covers liability for bodily injuries and property damage suffered by third parties and losses caused by uninsured or underinsured motorists. Also, under no-fault laws, policies written in some states provide first party personal injury protection. Some of the company's personal automobile insurance policies also offer personal umbrella liability coverage for an additional premium.

Homeowners: Insures against losses to residences and contents from fire, wind and other perils. Homeowners insurance includes owned dwellings, rental properties and coverage for tenants. The policies may provide other coverages, including loss related to recreational vehicles or watercraft, identity theft and personal items, such as jewelry.

Personal Lines provides automobile, homeowners and personal umbrella coverages to individuals across the United States, mostly through a program designed exclusively for members of AARP ('AARP Program'). The Hartford's automobile and homeowners products provide coverage options and pricing tailored to a customer's individual risk. The Hartford has individual customer relationships with AARP Program policyholders and, as a group, they represent a significant portion of the total Personal Lines' business.

The company continues to roll out its new cloud-based product and platform, Prevail, on a state by state basis, and was in 39 states as of December 2023. Prevail is tailored to the mature market and includes digital service capabilities that provide real time transaction support. Among other things, overall rate levels, price segmentation, rating factors and underwriting procedures are being updated through the introduction of Prevail. Personal Lines works with carrier partners to provide risk protection options for AARP members with needs beyond the company's product offering.

Marketing and Distribution

Personal Lines reaches diverse customers through multiple distribution channels, including direct-to-consumer and independent agents. The direct-to-consumer channel continues to represent a larger share of the automobile insurance market, accounting for more than one-third of industry premiums. In direct-to-consumer, Personal Lines markets its products through a mix of media, including direct mail, digital marketing, and television, as well as digital and print advertising. Through the agency channel, Personal Lines provides products and services to customers through a network of independent agents in the standard personal lines market, primarily serving mature, preferred consumers. These independent agents are not employees of the company.

Personal Lines has made significant investments in offering direct and agency-based customers the opportunity to interact with the company on-line, including via mobile devices. In addition, its technology platform for telephone sales centers enables sales representatives to provide an enhanced experience for direct-to-consumer customers, positioning the company to offer unique capabilities to AARP's member base.

Most of Personal Lines' sales are associated with its exclusive licensing arrangement with AARP, with the current agreement in place through December 31, 2032, to market automobile, homeowners and personal umbrella coverages to AARP's approximately 38 million members, primarily direct but also through independent agents. This relationship with AARP, which has been in place since 1984, provides Personal Lines with an important competitive advantage given the increase in the population of those over age 50 and the strength of the AARP brand.

Prior to May 2021, in most states, new business automobile and home policies were issued to AARP members with a lifetime continuation agreement endorsement, providing that the policies will be renewed as long as certain terms are met, such as timely payment of premium and maintaining a driver's license in good standing. However, beginning in May 2021, Personal Lines no longer offers the lifetime continuation agreement to new home and automobile policies. The endorsement will remain on renewal policies with original effective dates prior to May 2021.

In addition to selling to AARP members, Personal Lines offers its automobile and homeowners products to non-AARP customers, primarily through the independent agent channel. Personal Lines leverages its agency channel to target AARP members and other customer segments, primarily targeting the over age 50 preferred mature market, that value the advice of an independent agent and recognize the differentiated experience the company provides. In particular, the company has taken action to distinguish its brand within the over age 50 preferred mature market and improve profitability in the independent agent channel, placing more emphasis on the company's highly partnered agents.

P&C Other Operations

Property & Casualty Other Operations includes certain property and casualty operations, managed by the company, that have discontinued writing new business and includes substantially all of the company's pre-1986 asbestos and environmental ('A&E') exposures.

Group Benefits segment

Principal Products and Services

Group Life: Typically is term life insurance provided in the form of a yearly renewable policy. Other life coverages in this category include accidental loss of life and severe injury benefits and business travel accident insurance.

Group Disability: Typically comprised short-term disability, long-term disability, and paid family leave plans that pay a percentage of an employee's salary for a period of time if they are ill or injured and cannot perform the duties of their job. Short-term and long-term disability policies have elimination periods that must be satisfied prior to benefit payments. The company also earns fee income from leave management services for federal, state and employer family and medical leave and workplace accommodation programs, as well as the administration of employer self-funded disability plans.

Other Products: Includes other group coverages, such as retiree health insurance, critical illness, accident and hospital indemnity coverages.

Group insurance typically covers an entire group of people under a single contract, most typically the employees of a single employer or members of an association.

Group Benefits provides group life, disability and other group coverages to members of employer groups, associations and affinity groups through direct insurance policies and provides reinsurance to other insurance companies. In addition to employer paid coverages, the segment offers voluntary product coverages which are offered through employee payroll deductions. Group Benefits also offers disability underwriting, administration, and claims processing to self-funded employer plans. In addition, the segment offers a single-company leave management solution, which integrates work absence data from the insurer's short-term and long-term group disability and workers' compensation insurance business with its leave management administration services.

Statutory paid family leave ('PFL') and paid family and medical leave ('PFML') programs are a source of growth as the company offers fully insured coverage or administers self-insured coverage for some of these programs. As of 2023, thirteen states and the District of Columbia have enacted mandated PFL or PFML programs. Alabama, Arkansas, Florida,

New Hampshire, Tennessee, Texas, Vermont, and Virginia have also created opt-in paid leave programs, and additional states are considering adopting PFL or PFML programs.

Group Benefits generally offers term insurance policies, allowing for the adjustment of rates or policy terms at renewal in order to minimize the adverse effect of market trends, loss costs, changes in interest rates and other factors. Policies are typically sold with one, two or three-year rate guarantees depending upon the product and market segment.

Marketing and Distribution

The Group Benefits distribution network is managed through a regional sales office system to distribute its group insurance products and services through a variety of distribution outlets, including brokers, consultants, third-party administrators and trade associations. Additionally, the segment has relationships with several private exchanges which offer its products to employer groups. Technology providers, including Human Resources platform vendors, are taking an increasingly prominent role in influencing customer decisions that also influence selection of the group benefits insurance provider.

The company offers its voluntary products including critical illness, accident and hospital indemnity coverage to employees through the company's Employee Choice Benefits programs. The company's enhanced enrollment and marketing tools, such as My Tomorrow, are providing additional opportunities to educate individual participants about supplementary benefits and deepen their knowledge about product selection.

In addition to providing group disability, leave management and life insurance, the company offers integrated claim, leave and benefits administration with The Hartford's Ability Advantage platform.

Hartford Funds segment

Principal Products and Services

Mutual Funds: Includes approximately 60 actively managed mutual funds across a variety of asset classes, including domestic and international equity, fixed income, and multi-strategy investments, principally subadvised by two unaffiliated institutional asset management firms.

Exchange-traded funds: Exchange-traded funds ('ETF') include actively managed ETFs and multifactor ETFs. Actively-managed ETFs include fixed income, domestic equity and commodity products utilizing the same investment platform as the company's mutual funds. Multifactor ETFs are designed to track indices using passive investment techniques that strive to improve performance relative to traditional capitalization-weighted indices.

Third-party life and annuity separate accounts under management: Relates to assets of the life and annuity business sold in May 2018 that are still managed by the company's Hartford Funds segment.

The Hartford Funds segment provides investment management, administration, product distribution and related services to investors through a diverse set of investment products in domestic markets. Hartford Funds' comprehensive range of products and services assist clients in achieving their desired investment objectives. AUM are separated into three distinct categories referred to as mutual funds, ETFs and third-party life and annuity separate accounts under management.

Marketing and Distribution

The company's funds and ETFs are sold through national and regional broker-dealer organizations, independent financial advisers, defined contribution plans, financial consultants, bank trust groups and registered investment advisers. The company's distribution team is organized to sell primarily in the United States.

Corporate

The company includes in the Corporate category reserves for run-off structured settlement and terminal funding agreement liabilities, restructuring costs, capital raising activities (including equity financing, debt financing and related interest expense), transaction expenses incurred in connection with an acquisition, certain M&A costs, purchase accounting adjustments related to goodwill and other expenses not allocated to the reporting segments. Corporate also includes investment management fees and expenses related to managing third-party assets. In addition, up until June 30, 2021, Corporate included a 9.7% ownership interest in Hopmeadow Holdings LP, the legal entity that acquired Talcott Resolution (Hopmeadow Holdings, LP, Talcott Resolution Life Inc., and its subsidiaries).

Investment Operations

Hartford Investment Management Company ('HIMCO') is an SEC registered investment advisor and manages the company's investment operations. HIMCO provides customized investment strategies for The Hartford's investment portfolio, as well as for The Hartford's pension plan and institutional clients.

Regulation

The company's International operations include a Lloyd's Syndicate which is required to meet the minimum market standards set by Lloyd's, as well as the U.K. Prudential Regulatory Authority and the U.K. Financial Conduct Authority regulatory requirements. Consistent with the U.K.'s interpretation of Solvency II, both Lloyd's and the Prudential Regulatory Authority focus on the adequacy of capital held and solvency of an insurer against the risk profile and management of the authorized insurer in setting capital requirements.

The company sells and distributes its mutual funds and ETFs through a broker dealer subsidiary, and is subject to regulation promulgated and enforced by the Financial Industry Regulatory Authority, the SEC and/or, in some instances, state securities administrators. Other subsidiaries operate as investment advisers registered with the SEC under the Investment Advisers' Act of 1940, as amended, and are registered as investment advisers under certain state laws, as applicable.

Intellectual Property

The company has a trademark portfolio that the company considers important in the marketing of the company's products and services, including, among others, the trademarks of The Hartford name, the Stag Logo and the combination of these two trademarks.

History

The Hartford Financial Services Group, Inc. was founded in 1810. The company was incorporated in 1985.