Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
(Dollar amounts in millions, except for per share data, unless otherwise stated)
The Hartford provides projections and other forward-looking information in the following discussions, which contain many forward-looking statements, particularly relating to the Company’s future financial performance. These forward-looking statements are estimates based on information currently available to the Company, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to the cautionary statements set forth on pages 4 and 5 of this Form 10-K. Actual results are likely to differ, and in the past have differed, materially from those forecast by the Company, depending on the outcome of various factors, including, but not limited to, those set forth in the following discussion and in Part I, Item 1A, Risk Factors, and those identified from time to time in our other filings with the Securities and Exchange Commission. The Hartford undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise.
Certain reclassifications have been made to historical financial information presented in Management's Discussion and Analysis of Financial Condition and Results of Operations to conform to the current period presentation.
The Hartford defines increases or decreases greater than or equal to 200%, or changes from a net gain to a net loss position, or vice versa, as "NM" or not meaningful.
For discussion of the earliest of the three years included in the financial statements of the current filing, refer to Part II, Item 7, MD&A in The Hartford’s 2024 Form 10-K Annual Report.
Index
Description
Page
Key Performance Measures and Ratios
The Hartford's Operations
Financial Highlights
Consolidated Results of Operations
Investment Results
Critical Accounting Estimates
Business Insurance
Personal Insurance
Property & Casualty Other Operations
Employee Benefits
Hartford Funds
Corporate
Enterprise Risk Management
Capital Resources and Liquidity
Impact of New Accounting Standards
Throughout the MD&A, we use certain terms and abbreviations, the more commonly used are summarized in the Acronyms section .
Key Performance Measures and Ratios
The Company considers the measures and ratios in the following discussion to be key performance indicators for its businesses. Management believes that these ratios and measures are useful in understanding the underlying trends in The Hartford’s businesses. However, these key performance indicators should only be used in conjunction with, and not in lieu of, the results presented in the reportable segment and corporate operating summaries that follow in this MD&A. These ratios and measures may not be comparable to other performance measures used by the Company’s competitors.
Definitions of Non-GAAP and Other Measures and Ratios
Assets Under Management ("AUM")- Include mutual fund and ETF assets. AUM is a measure used by the Company's Hartford Funds segment because a significant portion of the segment’s revenues and expenses are based upon asset values. These revenues and expenses increase or decrease with a rise or fall in AUM whether caused by changes in the market or through net flows.
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Book Value per Diluted Share excluding accumulated other comprehensive income (loss) ("AOCI")- This is a non-GAAP per share measure that i s calculated by dividing (a) common stockholders' equity, excluding AOCI, after tax, by (b) common shares outstanding and dilutive potential common shares. The Company provides this measure to enable investors to analyze the amount of the Company's net worth that is primarily attributable to the Company's business operations. The Company believes that excluding AOCI from the numerator is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period, primarily based on changes in interest rates. Book value per diluted share is the most directly comparable U.S. GAAP measure.
Combined Ratio- The sum of the loss and loss adjustment expense ratio, the expense ratio and the policyholder dividend ratio. This ratio is a relative measurement that describes the related cost of losses and expenses for every $100 of earned premiums. A combined ratio below 100 demonstrates underwriting profit; a combined ratio above 100 demonstrates underwriting losses.
Core Earnings- The Hartford uses the non-GAAP measure core earnings as an important measure of the Company’s operating performance. The Hartford believes that core earnings provides investors with a valuable measure of the performance of the Company’s ongoing businesses because it reveals trends in our insurance and financial services businesses that may be obscured by including the net effect of certain items. Therefore, the following items are excluded from core earnings:
• Certain realized gains and losses - Generally realized gains and losses are primarily driven by investment decisions and external economic developments, the nature and timing of which are unrelated to the insurance and underwriting aspects of our business. Accordingly, core earnings excludes the effect of all realized gains and losses that tend to be highly variable from period to period based on capital market conditions. The Hartford believes, however, that some realized gains and losses are integrally related to our insurance operations, so core earnings includes net realized gains and losses such as net periodic settlements on credit derivatives. These net realized gains and losses are directly related to an offsetting item included in the income statement such as net investment income.
• Restructuring and other costs - Costs incurred as part of a restructuring plan are not a recurring operating expense of the business.
• Loss on extinguishment of debt - Largely consisting of make-whole payments or tender premiums upon paying debt off before maturity, these losses are not a recurring operating expense of the business.
• Gains and losses on reinsurance transactions - Gains or losses on reinsurance, such as those entered into upon sale of a business or to reinsure loss reserves, are not a recurring operating expense of the business.
• Integration and other non-recurring M&A costs - These costs, including transaction costs incurred in connection with an acquired business, are incurred over a short period of time and do not represent an ongoing operating expense of the business.
• Change in loss reserves upon acquisition of a business - These changes in loss reserves are excluded from core earnings because such changes could obscure the ability to compare results in periods after the acquisition to results of periods prior to the acquisition.
• Deferred gain resulting from retroactive reinsurance and subsequent changes in the deferred gain - Retroactive reinsurance agreements economically transfer risk to the reinsurers and excluding the deferred gain on retroactive reinsurance and related amortization of the deferred gain from core earnings provides greater insight into the economics of the business.
• Change in valuation allowance on deferred taxes related to non-core components of before tax income - These changes in valuation allowances are excluded from core earnings because they relate to non-core components of before tax income, such as tax attributes like capital loss carryforwards.
• Results of discontinued operations - These results are excluded from core earnings for businesses sold or held for sale because such results could obscure the ability to compare period over period results for our ongoing businesses.
In addition to the above components of net income available to common stockholders that are excluded from core earnings, preferred stock dividends declared, which are excluded from net income, are included in the determination of core earnings. Preferred stock dividends are a cost of financing more akin to interest expense on debt and are expected to be a recurring expense as long as the preferred stock is outstanding.
Net income (loss) and net income (loss) available to common stockholders are the most directly comparable U.S. GAAP measures to core earnings. Core earnings should not be considered as a substitute for net income (loss) or net income (loss) available to common stockholders and does not reflect the overall profitability of the Company's business. Therefore, The Hartford believes that it is useful for investors to evaluate net income (loss), net income (loss) available to common stockholders, and core earnings when reviewing the Company's performance.
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Reconciliation of Net Income to Core Earnings
For the years ended December 31,
Net income
Preferred stock dividends
Net income available to common stockholders
Adjustments to reconcile net income available to common stockholders to core earnings:
Net realized losses excluded from core earnings, before tax
Restructuring and other costs, before tax
Integration and other non-recurring M&A costs, before tax
Change in deferred gain on retroactive reinsurance, before tax [1]
Income tax expense (benefit) [2]
Core earnings
[1] The Company recorded amortization of the deferred gain related to the Navigators adverse development cover ("Navigators ADC") of $64 and $145 for the year ended December 31, 2025 and 2024, respectively. The deferred gain has been fully amortized as of September 30, 2025. In addition, for the year ended December 31, 2024, the Company ceded, $62 of losses under the asbestos and environmental adverse development cover ("A&E ADC"), which was reflected as an increase to the deferred gain. For additional information regarding the adverse development cover ("ADC") reinsurance agreements, refer to Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Consolidated Financial Statements.
[2] Primarily represents the federal income tax expense (benefit) related to before tax items not included in core earnings.
Core Earnings Margin- The Hartford uses the non-GAAP measure core earnings margin to evaluate, and believes it is an important measure of, the Employee Benefits segment's operating performance. Core earnings margin is calculated by dividing core earnings by revenues, excluding buyouts and realized gains (losses). Net income margin, calculated by dividing net income by revenues, is the most directly comparable U.S. GAAP measure. The Company believes that core earnings margin provides investors with a valuable measure of the performance of Employee Benefits because it reveals trends in the business that may be obscured by the effect of buyouts and realized gains (losses) as well as other items excluded in the calculation of core earnings. Core earnings margin should not be considered as a substitute for net income margin and does not reflect the overall profitability of Employee Benefits. Therefore, the Company believes it is important for investors to evaluate both core earnings margin and net income margin when reviewing performance. A reconciliation of net income margin to core earnings margin is set forth in the Results of Operations section within MD&A - Employee Benefits.
Current Accident Year Catastrophe Ratio- A component of the loss and loss adjustment expense ratio, represents the ratio of catastrophe losses incurred in the current accident year ("CAY") (net of reinsurance) to earned premiums. For U.S. events, a catastrophe is an event that causes $25 or more in industry insured property losses and affects a significant number of property and casualty policyholders and insurers, as defined by the Property Claim Services office of Verisk. For international events, the Company's approach is similar, informed, in part, by how Lloyd's of London defines major losses. Lloyd's of London is an insurance market-place operating worldwide ("Lloyd's"). Lloyd's does not underwrite risks. The Company accepts risks as the sole member of Lloyd's Syndicate 1221 ("Lloyd's Syndicate"). The current accident year catastrophe ratio includes the effect of , but does not include the effect of reinstatement premiums.
Expense Ratio- For Business Insurance and Personal Insurance is the ratio of underwriting expenses less fee income, to earned premiums. Underwriting expenses include the amortization of deferred policy acquisition costs ("DAC"), amortization of other intangible assets and insurance operating costs and other expenses, including certain centralized services costs and bad debt expense. DAC includes commissions, taxes, licenses and fees and other incremental direct underwriting expenses and are amortized over the policy term.
The expense ratio for Employee Benefits is expressed as the ratio of insurance operating costs and other expenses including amortization of intangibles and amortization of DAC, to premiums and other considerations, excluding buyout premiums.
The expense ratio for Business Insurance, Personal Insurance and Employee Benefits does not include integration and other transaction costs associated with an acquired business.
Fee Income- Is largely driven from amounts earned as a result of contractually defined percentages of AUM in our Hartford Funds business. These fees are generally earned on a daily basis. Therefore, this fee income increases or decreases with the rise or fall in AUM whether caused by changes in the market or through net flows.
Gross New Business Premium- Represents the amount of premiums charged, before ceded reinsurance, for policies issued to customers who were not insured with the Company in the previous policy term. Gross new business premium plus gross renewal written premium less ceded reinsurance equals total written premium.
Loss and Loss Adjustment Expense Ratio- A measure of the cost of claims incurred in the calendar year divided by earned premium and includes losses and loss adjustment expenses incurred for both the current and prior accident years. Among other factors, the loss and loss adjustment expense ratio needed for the Company to achieve
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its targeted return on equity ("ROE") fluctuates from year to year based on changes in the expected investment yield over the claim settlement period, the timing of expected claim settlements and the targeted returns set by management based on the competitive environment.
The loss and loss adjustment expense ratio is affected by claim frequency and claim severity, particularly for shorter-tail property lines of business, where the emergence of claim frequency and severity is credible and likely indicative of ultimate losses. Claim frequency represents the percentage change in the average number of reported claims per unit of exposure in the current accident year compared to that of the previous accident year. Claim severity represents the percentage change in the estimated average cost per claim in the current accident year compared to that of the previous accident year. As one of the factors used to determine pricing, the Company’s practice is to first make an overall assumption about claim frequency and severity for a given line of business and then, as part of the rate-making process, adjust the assumption as appropriate for the particular state, product or coverage.
Underlying Loss and Loss Adjustment Expense Ratio- This non-GAAP financial measure is the cost of non-catastrophe loss and loss adjustment expenses incurred in the current accident year divided by earned premiums. The loss and loss adjustment expense ratio is the most directly comparable U.S. GAAP measure. Management believes that the underlying loss and loss adjustment expense ratio is a performance measure that is useful to investors as it removes the impact of volatile and unpredictable catastrophe losses and prior accident year development ("PYD"). A reconciliation of the loss and adjustment expense ratio to the underlying and adjustment expense ratio is set forth in the Reportable Segment and Corporate Operating Summaries section within MD&A.
Loss Ratio, excluding Buyouts- Utilized for the Employee Benefits segment and is expressed as a ratio of benefits, losses and loss adjustment expenses, excluding those related to buyout premiums, to premiums and other considerations, excluding buyout premiums. Since Employee Benefits occasionally buys a block of claims for a stated premium amount, the Company excludes this buyout from the loss ratio used for evaluating the profitability of the business as buyouts may distort the loss ratio. Buyout premiums represent takeover of open claim liabilities and other non-recurring premium amounts.
Net investment income excluding limited partnerships and other alternative investments- This non-GAAP measure is the amount of net investment income on a consolidated level earned from invested assets, excluding the net investment income related to limited partnerships and other alternative investments. The Company believes that net investment income excluding limited partnerships and other alternative investments, provides investors with an important measure of the trend in investment earnings because it excludes the impact of the volatility in returns related to limited partnerships and other alternative investments. Net investment income is the most directly comparable U.S. GAAP measure. A reconciliation of net investment income to net investment income excluding limited partnerships and other alternative investments - is set forth in the Investment Results section within MD&A.
Mutual Fund and Exchange-Traded Fund Assets- Are owned by the shareowners of those products and not by the Company and, therefore, are not reflected in the Company’s Consolidated Financial Statements, except in instances where the Company seeds new investment products.
Mutual fund and ETF assets are a measure used by the Company primarily because a significant portion of the Company’s Hartford Funds segment revenues and expenses are based upon asset values. These revenues and expenses increase or decrease with a rise or fall in AUM whether caused by changes in the market or through net flows.
Net New Business Premium- Represents the amount of premiums charged, after ceded reinsurance, for policies issued to customers who were not insured with the Company in the previous policy term. Net new business premium plus renewal written premium equals total written premium.
Policy Count Retention- For small business, represents the number of renewal policies issued during the current year period divided by the new and renewal policies issued in the prior period. Policy count retention is affected by a number of factors, including the percentage of renewal policy quotes accepted and decisions by the Company to non-renew policies because of specific policy underwriting concerns or because of a decision to reduce premium writings in certain classes of business or states. Policy count retention is also affected by advertising and rate actions taken by us and competitors.
Effective Policy Count Retention- For Personal Insurance, represents the number of policies expected to renew in the current year period, based on contract effective dates, divided by the new and renewal policies effective in the prior period. Effective policy count retention is affected by a number of factors, including the percentage of renewal policy quotes accepted and decisions by the Company to non-renew policies because of specific policy underwriting concerns or because of a decision to reduce premium writings in certain classes of business or states. Effective policy count retention is also affected by advertising and rate actions taken by us and competitors, as well as the effect of subsequent cancellations and non-renewals by customers. Effective policy count retention statistics are subject to change from period to period based on the effect of differences between actual and expected policy cancellations throughout the policy period.
Policies in-force- Represents the number of policies with coverage in effect as of the end of the period. The number of policies in-force is a growth measure used for Personal Insurance, small business, and middle market lines within middle & large business and is affected by both new business growth and retention.
Policyholder Dividend Ratio- The ratio of policyholder dividends to earned premium.
Premium Retention- For middle & large business, represents the ratio of prior period premiums that were successfully renewed divided by premiums associated with policies available for renewal in the current period. Premium retention excludes premium amounts from annual audits, renewal written price increases and changes in exposure, including amount of insurance. Premium retention statistics are subject to change from period to period based on a number of
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factors, including the effect of subsequent cancellations and non-renewals .
Prior Accident Year Loss and Loss Adjustment Expense Ratio- Represents the increase (decrease) in the estimated cost of settling catastrophe and non-catastrophe claims incurred in prior accident years as recorded in the current calendar year divided by earned premiums.
Reinstatement Premiums- Represents additional ceded premium paid for the reinstatement of the amount of reinsurance coverage that was reduced as a result of the Company ceding losses to reinsurers.
Renewal Earned Price Increase (Decrease)- Written premiums are earned over the policy term, which is six months for certain personal automobile business and twelve months for substantially all of the remainder of the Company’s P&C business. Since the Company earns premiums over the six to twelve month term of the policies, renewal earned price increases (decreases) lag renewal written price increases (decreases) by six to twelve months.
Renewal Written Price Increase (Decrease)- For Business Insurance, represents the combined effect of rate changes, and individual risk pricing decisions per unit of exposure on policies that renewed and includes amount of insurance. For Personal Insurance, renewal written price increases represent the total change in premium per policy since the prior year on those policies that renewed and includes the combined effect of rate changes, amount of insurance and other changes in exposure. For Personal Insurance, other changes in exposure include, but are not limited to, the effect of changes in number of drivers, vehicles and incidents, as well as changes in customer policy elections, such as deductibles and limits. The rate component represents the change in rate impacting renewal policies as previously filed with and approved by state regulators during the period. Amount of insurance represents the change in the value of the rating base, such as model year/vehicle symbol for automobiles, building replacement costs for property and wage inflation for workers’ compensation. A number of factors affect renewal written price increases (decreases) including expected loss costs as projected by the Company’s pricing actuaries, rate filings approved by state regulators, risk selection decisions made by the Company’s underwriters and marketplace competition. Renewal written price changes reflect the property and casualty insurance market cycle. Prices tend to increase for a particular line of business when insurance carriers have incurred significant losses in that line of business in the recent past or the industry as a whole commits less of its capital to writing exposures in that line of business. Prices tend to decrease when recent experience has been or when competition among insurance carriers increases. Renewal written price statistics are subject to change from period to period, based on a number of factors, including changes in actuarial estimates and the effect of subsequent and non-renewals, and modifications made to reflect ultimate pricing .
Return on Assets ("ROA"), Core Earnings- The Company uses this non-GAAP financial measure to evaluate, and believes is an important measure of, the Hartford Funds segment’s operating performance. ROA, core earnings is calculated by dividing annualized core earnings by a daily average AUM. ROA is the most directly comparable U.S. GAAP measure. The Company believes that ROA, core earnings, provides investors with a valuable measure of the performance of the Hartford Funds segment because it reveals trends in our business that may be obscured by the effect of items excluded in the calculation of core earnings. ROA, core earnings, should not be considered as a substitute for ROA and does not reflect the overall profitability of our Hartford Funds business. Therefore, the Company believes it is important for investors to evaluate both ROA, and ROA, core earnings when reviewing the Hartford Funds segment performance. A reconciliation of ROA to ROA, core earnings is set forth in the Results of Operations section within MD&A - Hartford Funds.
Underlying Combined Ratio- This non-GAAP financial measure of underwriting results represents the combined ratio before catastrophes, prior accident year development and current accident year change in loss reserves upon acquisition of a business. Combined ratio is the most directly comparable U.S. GAAP measure. The Company believes this ratio is an important measure of the trend in profitability since it removes the impact of volatile and unpredictable catastrophe losses and prior accident year loss and loss adjustment expense reserve development. The changes to loss reserves upon acquisition of a business are excluded from underlying combined ratio because such changes could obscure the ability to compare results in periods after the acquisition to results of periods prior to the acquisition as such trends are to our investors' ability to assess the Company's financial performance. A reconciliation of combined ratio to underlying combined ratio is set forth in the Results of Operations section within MD&A - Business Insurance and Personal Insurance.
Underwriting Gain (Loss)- This non-GAAP financial measure is a before tax measure that represents earned premiums less incurred losses, loss adjustment expenses and underwriting expenses. Net income (loss) is the most directly comparable U.S. GAAP measure. The Hartford's management evaluates profitability of the Business and Personal Insurance segments primarily on the basis of underwriting gain or loss. Underwriting gain (loss) is influenced significantly by earned premium growth and the adequacy of The Hartford's pricing. Underwriting profitability over time is also greatly influenced by The Hartford's underwriting discipline, as management strives to manage exposure to loss through favorable risk selection and diversification, management of , use of reinsurance and its ability to manage its expenses. The Hartford believes that underwriting () provides investors with a measure of , before tax, derived from underwriting activities, which are managed separately from the Company's investing activities.
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Reconciliation of Net Income to Underwriting Gain (Loss)
For the years ended December 31,
Business Insurance
Net income
Adjustments to reconcile net income to underwriting gain:
Net investment income
Net realized losses
Other (income) expense
Income tax expense
Underwriting gain
Personal Insurance
Net income (loss)
Adjustments to reconcile net income (loss) to underwriting gain (loss):
Net investment income
Net realized losses
Net servicing and other (income) expense
Income tax expense (benefit)
Underwriting gain (loss)
P&C Other Ops
Net loss
Adjustments to reconcile net loss to underwriting loss:
Net investment income
Net realized losses
Other expense
Income tax benefit
Underwriting loss
Written and Earned Premiums- Written premium represents the amount of premiums charged for policies issued, net of reinsurance, during a fiscal period. Premiums are considered earned and are included in the financial results on a pro rata basis over the policy period. Management believes that written premium is a performance measure that is useful to investors as it reflects current trends in the Company’s sale of property and casualty insurance products. Written and earned premium are recorded net of ceded reinsurance premium.
Written premium growth, for the Company's property and casualty insurance businesses, is a function of retention, pricing, exposure growth and new business, all of which can be impacted by competitive market conditions and general economic conditions. Changes in reinsurance programs can also impact written premium growth.
Traditional life and disability insurance type products, such as those sold by Employee Benefits, collect premiums from policyholders in exchange for financial protection for the policyholder from a specified insurable loss, such as death or disability. These premiums together with net investment income earned are used to pay the contractual obligations under these insurance contracts.
Two major factors, sales and persistency, impact premium growth. Sales can increase or decrease in a given year based
on a number of factors, including but not limited to, customer demand for the Company’s product offerings, pricing competition, distribution channels and the Company’s reputation and ratings. Persistency refers to the percentage of premium remaining in-force from year-to-year.
The Hartford's Operations
The Hartford conducts business principally in five reportable segments including Business Insurance, Personal Insurance, Property & Casualty Other Operations, Employee Benefits and Hartford Funds, as well as a Corporate category. The Company includes in the Corporate category capital raising activities (including equity financing, debt financing and related interest expense), purchase accounting adjustments related to goodwill, reserves for run-off structured settlement and terminal funding agreement liabilities, restructuring costs, transaction expenses incurred in connection with an acquisition, certain M&A costs, and other expenses not allocated to the reportable segments. Corporate also includes investment management fees and expenses related to managing third-party assets.
The Company derives its revenues principally from: (a) premiums earned for insurance coverage provided to insureds; (b) management fees on mutual fund and ETF assets; (c) net investment income; (d) fees earned for services provided
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to third parties; and (e) net realized gains and losses. Premiums charged for insurance coverage are earned principally on a pro rata basis over the terms of the related policies in-force.
The profitability of the Company's property and casualty insurance businesses over time is greatly influenced by the Company’s underwriting discipline, which seeks to manage exposure to loss through favorable risk selection and diversification, its management of claims, its use of reinsurance, the size of its in force block, making reliable estimates of actual mortality and morbidity, and its ability to manage its expense ratio which it accomplishes through economies of scale and its management of acquisition costs and other insurance operating costs. Pricing adequacy depends on a number of factors, including the ability to obtain regulatory approval for rate changes, proper evaluation of underwriting risks, the ability to project future loss cost frequency and severity based on historical loss experience adjusted for known trends, the Company’s response to rate actions taken by competitors, its expense levels and expectations about regulatory and legal developments. The Company seeks to price its insurance policies such that insurance premiums and future net investment income earned on premiums received will cover insurance operating costs and the ultimate cost of paying reported on the policies and provide for a profit margin. For many of its insurance products, the Company is required to obtain approval for its premium rates from state insurance departments and the Lloyd's Syndicate's ability to write business is subject to Lloyd's approval for its premium capacity each year. Most of Personal Insurance written premium is associated with our licensing agreement with AARP, which is through December 31, 2032. This agreement provides an important competitive given the size of the 50 plus population and the of the AARP brand.
Similar to property and casualty, profitability of the Employee Benefits business depends, in large part, on the ability to evaluate and price risks appropriately and make reliable estimates of mortality, morbidity, disability and longevity. To manage the pricing risk, Employee Benefits generally offers term insurance policies, allowing for the adjustment of rates or policy terms in order to minimize the adverse effect of market trends, loss costs, declining interest rates and other factors. However, as policies are typically sold with rate guarantees an average of three years, pricing for the Company’s products could prove to be inadequate if loss and expense trends emerge adversely during the rate guarantee period or if investment returns are lower than expected at the time the products were sold. For some of its products, the Company is required to obtain approval for its premium rates from state insurance departments. New and renewal business for employee benefits business, particularly for LTD, are priced using an assumption
about expected investment yields over time. While the Company employs asset-liability duration matching strategies to mitigate risk and may use interest-rate sensitive derivatives to hedge its exposure in the Employee Benefits investment portfolio, cash flow patterns related to the payment of benefits and claims are uncertain and actual investment yields could differ significantly from expected investment yields, affecting profitability of the business. In addition to appropriately evaluating and pricing risks, the profitability of the Employee Benefits business depends on other factors, including the Company’s response to pricing decisions and other actions taken by competitors, its ability to offer voluntary products and self-service capabilities, the persistency of its sold business and its ability to manage its expenses which it seeks to achieve through economies of scale and operating efficiencies.
The financial results of the Company’s mutual fund and ETF businesses depend largely on the amount of AUM and the level of fees charged based, in part, on asset share class and fund type. Changes in AUM are driven by the two main factors of net flows and the market return of the funds, which are heavily influenced by the return realized in the equity and bond markets. Net flows are comprised of new sales less redemptions by mutual fund and ETF shareowners. Financial results are highly correlated to the growth in AUM since these funds generally earn fee income on a daily basis.
The investment return, or yield, on invested assets is an important element of the Company’s earnings since insurance products are priced with the assumption that premiums received can be invested for a period of time before benefits, losses and loss adjustment expenses are paid. Due to the need to maintain sufficient liquidity to satisfy claim obligations, the majority of the Company’s invested assets have been held in available-for-sale ("AFS") securities, including, among other asset classes, corporate bonds, municipal bonds, government debt, short-term debt, mortgage-backed securities, asset-backed securities ("ABS") and collateralized loan obligations ("CLOs"). The Company also invests in commercial mortgage loans as well as limited partnerships and other alternative investments, which are private investments that are less liquid, but have the potential to generate higher returns. The primary investment objective for the Company is to maximize economic value, consistent with acceptable risk parameters, including the management of credit risk and interest rate sensitivity of invested assets, while generating sufficient net of tax income to meet policyholder and corporate obligations. Investment strategies are developed based on a variety of factors including business needs, regulatory requirements and tax considerations.
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2025 Financial Highlights
Net Income Available to Common Stockholders
Net Income Available to Common Stockholders per Diluted Share
Book Value per Diluted Share
Increased $725 or 23%
Increased $2.97 or 29%
Increased $11.22 or 20%
The effect of higher earned premiums in P&C
Increase in net income available to common stockholders
Net income in excess of common stockholder dividends
Higher net investment income
Reduction in outstanding shares due to share repurchases
Dilutive effective of share repurchases
More favorable P&C prior accident year reserve development
Lower underlying loss and LAE ratio in Personal Insurance
Higher underlying loss and LAE ratio in Business Insurance
Investment Yield, After Tax
Property & Casualty Combined Ratio
Employee Benefits Net Income Margin
Increased 20 bps
Improved 2.9 points
Decreased 0.1 points
Higher yield on limited partnerships and other alternative investments
More favorable prior accident year reserve development
Higher group disability loss ratio
Reinvesting at higher interest rates
Lower underlying loss and LAE ratio in Personal Insurance
Higher expense ratio, including higher staffing and technology costs
Lower yield on variable-rate securities
Lower CAY catastrophe losses
Lower group life loss ratio
Higher underlying loss and LAE ratio in Business Insurance
Higher net investment income
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Consolidated Results of Operations
The Consolidated Results of Operations should be read in conjunctio n with the Company's Consolidated Financial Statements and the related Notes as well as with the Reportable Segment and Corporate Operating Summaries within the MD&A.
Consolidated Results of Operations
Increase (Decrease) From 2024 to 2025
Increase (Decrease) From 2023 to 2024
Earned premiums
Fee income
Net investment income
Net realized losses
Other revenues
Total revenues
Benefits, losses and loss adjustment expenses
Amortization of deferred policy acquisition costs
Insurance operating costs and other expenses
Interest expense
Amortization of other intangible assets
Restructuring and other costs
Total benefits, losses and expenses
Income before income taxes
Income tax expense
Net income
Preferred stock dividends
Net income available to common stockholders
Year ended December 31, 2025 compared to 2024
Net income available to common stockholders increased by $725, primarily driven by:
• A higher P&C underwriting gain of $623, before tax, primarily driven by the effect of earned premium growth, a higher level of favorable prior accident year reserve development, and a lower underlying loss and LAE ratio in Personal Insurance, partially offset by a higher underlying loss and LAE ratio in Business Insurance;
• Higher net investment income of $343, before tax, driven by a higher level of invested assets, higher income from limited partnerships and other alternative investments, and reinvesting at higher interest rates, partially offset by a lower yield on variable-rate securities; and
• Higher other revenues driven by an increase in valuation of an investment.
These increases were partially offset by:
• In Employee Benefits, the impact of a higher expense ratio, including higher staffing costs and technology costs, and a higher long-term disability loss ratio, partially offset by a lower group life loss ratio, a lower loss ratio on the paid family and medical leave product, and the impact of slightly higher fully insured ongoing premiums; and
• Higher net realized losses of $39, before tax.
For a discussion of the Company's operating results by segment, see MD&A - Reportable Segment and Corporate Operating Summaries.
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Revenue
Earned Premiums
Earned premiums increased by $1,463 or 6% primarily due to:
• An increase in P&C reflecting a 9% increase in Business Insurance and an 8% increase in Personal Insurance.
– Contributing to the increase in Business Insurance was the effect of an increase in new business across most lines of business and earned pricing increases.
– For Personal Insurance, earned premium increased primarily due to the effect of earned pricing increases, partially offset by a decline in policies in-force.
• Employee Benefits earned premium was up slightly as an increase in exposure on existing accounts was largely offset by lower fully insured ongoing sales during the past year.
Fee income increased primarily due to a $42 increase in Hartford Funds driven by higher daily average assets resulting from an increase in equity market levels, partially offset by net outflows over the preceding twelve-month period.
Net Investment Income
Net investment income increased due to the impact of a higher level of invested assets, higher income from limited partnerships and other alternative investments, and reinvesting at higher interest rates, partially offset by a lower yield on variable-rate securities.
Net realized losses increased primarily due to:
• Lower appreciation in value of equity securities in the 2025 period compared to the 2024 period;
• Losses on transactional foreign currency revaluation in the 2025 period compared to gains in the 2024 period;
• Greater depreciation in value of fixed maturities, at fair value using the fair value option (“FVO securities”) in the 2025 period due to changes in credit spreads;
• Impairment of a real estate joint venture in the 2025 period; and
• Gains on interest rate derivatives in the 2024 period.
These losses were partially offset by fewer net losses on sales of fixed maturities.
For further discussion of investment results, see MD&A - Investment Results, Net Investment Income and MD&A - Investment Results, Net Realized Gains (Losses).
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Benefits, Losses and Expenses
Losses and LAE Incurred for P&C
Benefits, losses and loss adjustment expenses increased $364, due to:
• An increase in Property & Casualty of $355, which was attributable to:
– An increase in P&C CAY loss and LAE before catastrophes of $679, before tax, primarily due to the effect of higher earned premiums and a higher underlying loss and LAE ratio in Business Insurance, partially offset by a lower underlying loss and LAE ratio in Personal Insurance.
Partially offset by:
– A favorable change of $304, before tax, in P&C net prior accident year reserve development, with net favorable development in the 2025 period of $424, before tax, and in the 2024 period of $120, before tax. Among other reserve changes, prior year reserve development included adverse development for A&E reserves of $165 and $203, before tax, in 2025 and 2024, respectively, of which $62 was ceded to National Indemnity Company (“NICO”), a subsidiary of Berkshire Hathaway Inc. (“Berkshire”) in 2024 under the A&E ADC and accounted for as a deferred gain under retroactive reinsurance accounting. As of December 31, 2024, the Company has ceded the cumulative treaty limit of $1.5 billion. Also included within net prior accident year reserve development for the year ended 2025 and 2024 was a benefit of $64 and $145, respectively related to amortization of the Navigators ADC deferred gain, which has been fully amortized as of September 30, 2025.
Losses and LAE Incurred for Employee Benefits
Apart from the A&E reserve changes and the amortization of the Navigators ADC deferred gain, net favorable reserve development was $347 higher in 2025. Favorable prior year reserve development in the 2025 period was primarily driven by decreases in reserves related to workers' compensation, Personal Insurance automobile liability and physical damage, catastrophes, bond, homeowners, and commercial property, partially offset by unallocated loss adjustment expense (“ULAE”) reserves related to A&E reserves in P&C Other Operations. Favorable prior year reserve development in the 2024 period was primarily driven by decreases in reserves related to workers' compensation, catastrophes, bond, personal automobile liability and physical damage, homeowners, professional liability and uncollectible reinsurance, partially offset by increases in reserves for general liability, commercial automobile liability, assumed reinsurance, and unallocated loss adjustment expense reserves related to A&E reserves in P&C Other Operations.
– A decrease in CAY catastrophe losses of $20, before tax. Catastrophe losses in the 2025 period included losses from tornado, wind and hail events across several regions, but concentrated in the South and Midwest regions, and to a lesser extent, the Mid Atlantic and Mountain West regions as well as a loss of $305, net of reinsurance, from the January 2025 California Wildfire Event. Catastrophe losses in the 2024 period included losses from tornado, wind and hail events across several regions of the United States, as well as hurricanes and tropical storms primarily in the Southeast, South and Mid-Atlantic regions, and, to a lesser extent, from winter storms, primarily in the Pacific, Northeast, and South regions.
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For further discussion, see Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Consolidated Financial Statements.
• Employee Benefits losses and LAE increased slightly as a higher long-term disability loss ratio was partially offset by a lower group life loss ratio, reflecting reduced mortality, and improved results on the paid family and medical leave product due to pricing actions. The increase in long-term disability was driven by higher current-year loss trends and a benefit in the prior year related to an update to the long-term disability claim recovery rate assumptions.
Amortization of deferred policy acquisition costs increased from the prior year period driven by Business Insurance, reflecting an increase in earned premiums across all lines of business.
Insurance operating costs and other expenses increased due to:
• Higher staffing costs, including higher incentive compensation and benefits costs, partly in response to increased business volume; and
• Higher technology costs, including increased investment.
Income tax expense increased primarily due to an increase in income before tax. For further discussion of income taxes, see Note 16 - Income Taxes of Notes to Consolidated Financial Statements.
Investment Results
Composition of Invested Assets
December 31, 2025
December 31, 2024
Amount
Percent
Amount
Percent
Fixed maturities, AFS, at fair value
Fixed maturities, at fair value using the fair value option
Equity securities, at fair value
Mortgage loans (net of ACL of $49 and $44)
Limited partnerships and other alternative investments
Other investments [1]
Short-term investments
Total investments
[1] Primarily consists of equity fund investments, overseas deposits, consolidated investment funds, and derivative instruments which are carried at fair value.
December 31, 2025 compared to 2024
Total investments increased primarily due to an increase in fixed maturities, AFS, at fair value and limited partnerships and other alternative investments.
Fixed maturities, AFS, at fair value increased primarily due to net additions of corporate bonds, high-quality residential mortgage-backed securities ("RMBS") and ABS, partially offset by net reductions to tax-exempt municipal bonds. The increase was also due to higher valuations as a result of lower interest rates.
Limited partnerships and other alternative investments increased primarily driven by additional investments and higher valuations.
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Net Investment Income
For the years ended December 31,
(Before tax)
Amount
Yield [1]
Amount
Yield [1]
Amount
Yield [1]
Fixed maturities [2]
Equity securities
Mortgage loans
Limited partnerships and other alternative investments
Other [3]
Investment expense
Total net investment income
Adjustment for net investment income from limited partnerships and other alternative investments
Total net investment income excluding limited partnerships and other alternative investments
[1] Yields calculated using annualized net investment income divided by the monthly average invested assets at amortized cost, as applicable, excluding derivatives book value.
[2] Includes net investment income on short-term investments.
[3] Primarily includes changes in fair value of certain equity fund investments and income from derivatives that qualify for hedge accounting and are used to hedge fixed maturities.
Year ended December 31, 2025 compared to 2024
Total net investment income increased primarily due to a higher level of invested assets, higher income from limited partnerships and other alternative investments, and the impact of reinvesting at higher rates, partially offset by a lower yield on variable-rate securities.
Annualized net investment income yield, excluding limited partnerships and other alternative investments, increased primarily due to the impact of reinvesting at higher rates, partially offset by a lower yield on variable-rate securities.
Average reinvestment rate on fixed maturities and mortgage loans, excluding U.S. Treasury securities, for the year-ended December 31, 2025 was 5.6%, which was above the average yield of sales and maturities of 5.0% for the same period. Average reinvestment rate on fixed maturities and mortgage loans, excluding U.S. Treasury securities, for the year-ended December 31, 2024 was 5.9%, which was above the average yield of sales and maturities of 5.0% for the same period.
For the 2026 calendar year, we estimate the change in net investment income to increase due to a higher level of invested assets and a higher yield on limited partnerships and other alternative investments. The estimated change in net investment income is subject to variability including the impact of evolving market conditions.
Net Realized Gains (Losses)
For the years ended December 31,
(Before tax)
Gross gains on sales of fixed maturities
Gross losses on sales of fixed maturities
Equity securities [1]
Net credit losses on fixed maturities, AFS [2]
Change in ACL on mortgage loans [3]
Other, net [4]
Net realized gains (losses)
[1] The change in net unrealized gains (losses) on equity securities still held as of the end of the period and included in net realized gains (losses) were $49, $68, and $17 for the years ended December 31, 2025, 2024, and 2023, respectively.
[2] See Credit Losses on Fixed Maturities, AFS and Intent-to-Sell Impairments within the Investment Portfolio Risk section of the MD&A.
[3] See ACL on Mortgage Loans within the Investment Portfolio Risk section of the MD&A.
[4] Includes gains (losses) on non-qualifying derivatives for the years ended December 31, 2025, 2024, and 2023 of $(16), $13, and $(108), respectively, and gains (losses) from transactional foreign currency revaluation of $(15), $20, and $(15), respectively.
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Year ended December 31, 2025
Gross gains and losses on sales were primarily due to sales of tax-exempt municipals and corporate securities to fund purchases of higher-yielding investments.
Equity securities net gains were primarily driven by an increase in value due to higher equity market levels.
Other, net losses primarily included losses of $30 on FVO securities due to a decrease in value, losses of $20 on a real estate joint venture impairment, losses of $15 on transactional foreign currency revaluation, and losses of $14 on equity derivatives driven by changes in equity market levels.
Year ended December 31, 2024
Gross gains and losses on sales were primarily due to sales of U.S. treasuries, corporate securities, tax-exempt municipals, and commercial mortgage-backed securities ("CMBS") largely to fund purchases of higher-yielding investments.
Equity securities net gains were primarily driven by an increase in value due to higher equity market levels.
Other, net gains primarily included gains of $20 on transactional foreign currency revaluation and gains of $8 on interest rate derivatives driven by changes in interest rates.
Critical Accounting Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ, and in the past have differed, from those estimates.
The Company has identified the following estimates as critical in that they involve a higher degree of judgment and are subject to a significant degree of variability:
• property and casualty insurance product reserves, net of reinsurance;
• employee benefit LTD reserves, net of reinsurance;
• evaluation of goodwill for impairment;
• valuation of investments and derivative instruments including evaluation of credit losses on fixed maturities, AFS and ACL on mortgage loans; and
• contingencies relating to corporate litigation and regulatory matters.
In developing these estimates management makes subjective and complex judgments that are inherently uncertain and subject to material change as facts and circumstances develop. Although variability is inherent in these estimates, management believes the amounts provided are appropriate based upon the facts available upon compilation of the financial statements. Certain of these estimates are particularly sensitive to market conditions, and deterioration and/or volatility in the worldwide debt or equity markets could have a material impact on the Consolidated Financial Statements.
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Property & Casualty Insurance Product Reserves, Net of Reinsurance
Loss and LAE Reserves, Net of Reinsurance as of December 31, 2025
Business Insurance
Personal Insurance
Property & Casualty
Other Operations
Total Property &
Casualty Insurance
% Total Reserves-net
Workers’ compensation
General liability
Marine
Package business [1]
Commercial property
Automobile liability
Automobile physical damage
Professional liability
Bond
Homeowners
Asbestos and environmental
Assumed reinsurance
All other
Total reserves-net
Reinsurance and other recoverables
Total reserves-gross
[1] Business Insurance policy packages that include property and general liability coverages are generally referred to as the package line of business.
P&C Loss and Loss Adjustment Expense Reserves, Net of Reinsurance, by Segment as of December 31, 2025
For descriptions of the coverages provided under the lines of business shown above, see Part I - Item1, Business.
Overview of Reserving for Property and Casualty Insurance Claims
It typically takes many months or years to pay claims incurred under a property and casualty insurance product; accordingly,
the Company must establish reserves at the time the loss is incurred. Most of the Company’s policies provide for occurrence-based coverage where the loss is incurred when a claim event happens, like an automobile accident, house or building fire or injury to an employee under a workers’ compensation policy. Some of the Company's policies, mostly for directors and officers insurance and errors and omissions insurance, are claims-made policies where the loss is incurred in the period the claim event is reported to the Company even if the loss event itself occurred in an earlier period.
Loss and loss adjustment expense reserves provide for the estimated ultimate costs of paying claims under insurance policies written by the Company, less amounts paid to date. These reserves include estimates for both claims that have been reported and those that have not yet been reported, and include estimates of all expenses associated with processing and settling these claims. Case reserves are established by a claims handler on each individual claim and are adjusted as new information becomes known during the course of handling the claim. Incurred but not reported (“IBNR”) reserves represent the difference between the estimated ultimate cost of all claims and the actual loss and loss adjustment expenses reported to the Company by claimants to date (“reported losses”). Reported losses represent cumulative loss and loss adjustment expenses paid plus case reserves for outstanding reported . For most lines, Company actuaries evaluate the total reserves (IBNR and case reserves) on an year basis. An year is the calendar year in which a is incurred, or, in the case of -made policies, the calendar year in which a is reported. For certain lines, total reserves are evaluated
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on a policy year basis and then converted to accident year. A policy year is the calendar year in which a policy incepts.
Factors that Change Reserve Estimates- Reserve estimates can change over time because of unexpected changes in the external environment. Higher than expected inflation in claim costs, such as with medical care, hospital care, automobile parts, wages, and home and building repair, would cause claims to settle for more than they are initially reserved. Changes in the economy can cause an increase or decrease in the number of reported claims (claim frequency). For example, an improving economy could result in more automobile miles driven and a higher number of automobile-related claims, or a change in economic conditions can lead to more or fewer workers’ compensation reported claims. An increase in the number or percentage of claims litigated can increase the average settlement amount per claim (claim severity). Changes in the judicial environment can affect interpretations of damages and how policy coverage applies, which could increase or decrease claim severity. Over time, judges or juries in certain jurisdictions may be more inclined to determine liability and award . New legislation can also change how are defined or change the statutes of for the filing of civil suits, resulting in claim frequency or . In addition, new types of may arise from exposures not contemplated when the policies were written. Past examples include pharmaceutical products, silica, lead paint, sexual molestation and sexual and construction . Additionally, legal system pressures, such as increased funding and aggressive tactics by attorneys, can introduce the risk of potentially increasing jury awards and an increase in the percentage of impacting both general liability and automobile claim frequency and .
Reserve estimates can also change over time because of changes in internal Company operations. A delay or acceleration in handling claims may signal a need to increase or reduce reserves from what was initially estimated. New lines of business may have loss development patterns that are not well established. Changes in the geographic mix of business, changes in the mix of business by industry and changes in the mix of business by policy limit or deductible can increase the risk that losses will ultimately develop differently than the loss development patterns assumed in our reserving. In addition, changes in the quality of risk selection in underwriting and changes in interpretations of policy language could increase or decrease ultimate losses from what was assumed in establishing the reserves.
In the case of assumed reinsurance, all of the above risks apply. The Company assumes property and casualty risks from other insurance companies as part of its Global Re business and from certain pools and associations. Global Re, which is a part of the global specialty business, mostly assumes property, casualty and specialty risks. Changes in the case reserving and reporting patterns of insurance companies ceding to The Hartford can create additional uncertainty in estimating the reserves. Due to the inherent complexity of the assumptions used, final claim settlements may vary significantly from the present estimates of direct and assumed reserves, particularly when those settlements may not occur until well into the future.
Reinsurance Recoverables- Through both facultative and treaty reinsurance agreements, the Company cedes a
share of the risks it has underwritten to other insurance companies. The Company records reinsurance recoverables for losses and loss adjustment expenses ceded to its reinsurers representing the anticipated recovery from reinsurers of unpaid claims, including IBNR.
The Company estimates the portion of losses and loss adjustment expenses to be ceded based on the terms of any applicable facultative and treaty reinsurance, including an estimate of IBNR for losses that will ultimately be ceded.
The Company provides an allowance for uncollectible reinsurance, reflecting management’s best estimate of reinsurance cessions that may be uncollectible in the future due to reinsurers’ unwillingness or inability to pay. The allowance for uncollectible reinsurance comprises an ACL and an allowance for disputed balances. The ACL primarily considers the credit quality of the Company's reinsurers while the allowance for disputes considers recent outcomes in arbitration and litigation in disputes between reinsurers and cedants and recent commutation activity between reinsurers and cedants that may signal how the Company’s own reinsurance claims may settle. Where its reinsurance contracts permit, the Company secures reinsurance recoverables with various forms of collateral, including irrevocable letters of credit, secured trusts, funds held accounts and group-wide offsets. The allowance for uncollectible reinsurance was $66 as of December 31, 2025, comprised of $27 related to Business Insurance, $2 related to Personal Insurance and $37 related to Property & Casualty Other Operations.
The Company’s estimate of reinsurance recoverables, net of an allowance for uncollectible reinsurance, is subject to similar risks and uncertainties as the estimate of the gross reserve for unpaid losses and loss adjustment expenses for direct and assumed exposures.
Review of Reserve Adequacy- The Hartford regularly reviews the appropriateness of reserve levels at the line of business or more detailed level, taking into consideration the variety of trends that impact the ultimate settlement of claims. For Property & Casualty Other Operations, asbestos and environmental (“Run-off A&E”) reserves are reviewed by type of event rather than by line of business.
Reserve adjustments, which may be material, are reflected in the operating results of the period in which the adjustment is determined to be necessary. In the judgment of management, information currently available has been properly considered in establishing the reserves for unpaid losses and loss adjustment expenses and in recording the reinsurance recoverables for ceded unpaid losses.
Reserving Methodology
The following is a discussion of the reserving methods used for the Company's property and casualty lines of business other than asbestos and environmental.
Reserves are set by line of business within the operating segments. A single line of business may be written in more than one segment. Lines of business for which reported losses emerge over a long period of time are referred to as long-tail lines of business. Lines of business for which reported losses emerge more quickly are referred to as short-tail lines of business. The Company’s shortest-tail lines of business are
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homeowners, commercial property, marine property and automobile physical damage. The longest-tail lines of business include workers’ compensation, general liability, professional liability and assumed reinsurance. For short-tail lines of business, emergence of paid losses and case reserves is credible and likely indicative of ultimate losses. For long-tail lines of business, emergence of paid losses and case reserves is less credible in the early periods after a given accident year and, accordingly, may not be indicative of ultimate losses.
Use of Actuarial Methods and Judgments- The Company’s reserving actuaries regularly review reserves for both current and prior accident years using the most current claim data. A variety of actuarial methods and judgments are used for most lines of business to arrive at selections of estimated ultimate losses and loss adjustment expenses. New methods may be added for specific lines over time to inform these selections where appropriate. The reserve selections incorporate input, as appropriate, from claims personnel, pricing actuaries and operating management about reported loss cost trends and other factors that could affect the reserve estimates. Some reserves are reviewed fully each quarter, including loss and loss adjustment expense reserves for commercial property, homeowners, personal automobile, and most workers’ compensation lines. Other reserves, including commercial automobile, marine, package business, and most general liability and professional liability lines, are reviewed semi-annually. Certain additional reserves are also reviewed semi-annually or annually, including reserves for losses incurred in accident years older than twelve years for Personal Insurance and older than twenty years for Business Insurance, as well as reserves for bond, assumed reinsurance, latent exposures such as construction , and ULAE. For reserves that are reviewed semi-annually or annually, management monitors the emergence of paid and reported in the intervening quarters and, if warranted, performs a reserve review to determine whether the reserve estimate should change.
An expected loss ratio ("ELR") is used in initially recording the reserves for both short-tail and long-tail lines of business. This ELR is determined by starting with the average loss ratio of recent prior accident years and adjusting that ratio for the effect of expected changes to earned pricing, loss frequency and severity, mix of business, ceded reinsurance and other factors. For short-tail lines, IBNR for the current accident year gives weight to both the initial ELR multiplied by earned premium approach as well as a loss development approach, given early reported losses are more credible than in long tailed lines. For long-tailed lines, IBNR for the current accident year is initially recorded as the product of the ELR for the period and the earned premium for the period, less reported losses for the period.
As losses emerge or develop in periods subsequent to a given accident year, reserving actuaries use other methods to
estimate ultimate unpaid losses in addition to the ELR method. These primarily include paid and reported loss development methods, frequency/severity techniques and the Bornhuetter-Ferguson method (a combination of the ELR method with the paid development or reported development method). Within any one line of business, the methods that are given more weight vary based primarily on the maturity of the accident year, the mix of business and the particular internal and external influences impacting the claims experience or the methods. The output of the reserve reviews are reserve estimates representing a range of actuarial indications.
Reserve Discounting- Most of the Company’s property and casualty insurance product reserves are not discounted. However, the Company has discounted liabilities funded through structured settlements and has discounted a portion of workers’ compensation reserves that have a fixed and determinable payment stream. For further discussion of these discounted liabilities, see Note 1 - Basis of Presentation and Significant Accounting Policies of Notes to Consolidated Financial Statements.
Differences Between U.S. GAAP and Statutory Basis Reserves- As of December 31, 2025 and 2024, U.S. property and casualty insurance product reserves for losses and loss adjustment expenses, net of reinsurance recoverables, reported under U.S. GAAP were approximately $1.4 billion lower than net reserves reported on a statutory basis, primarily due to reinsurance recoverables on the A&E adverse development cover reinsurance agreement which is recorded as a reduction of other liabilities under statutory accounting. For further discussion of these adverse development cover reinsurance agreements, see Note 1 - Basis of Presentation and Significant Accounting Policies of Notes to Consolidated Financial Statements. Excluding the effect of these retroactive reinsurance agreements, U.S. property and casualty insurance product reserves for losses and loss adjustment expenses, net of reinsurance recoverables, reported under U.S. GAAP were approximately equal to net reserves reported on a statutory basis.
Reserving Methods by Line of Business- Apart from Run-off A&E, which is discussed in the following section on Property & Casualty Other Operations, below is a general discussion of which reserving methods are preferred by line of business. Because the actuarial estimates are generated at a much finer level of detail than line of business (e.g., by distribution channel, coverage, accident period), other methods than those described for the line of business may also be employed for a coverage and accident year within a line of business. Also, as circumstances change, the methods that are given more weight will change.
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Preferred Reserving Methods by Line of Business
Commercial property, homeowners and automobile physical damage
These short-tailed lines are relatively fast-developing and paid and reported development techniques are used. These methods use historical data to generate paid and reported loss development patterns, which are then applied to cumulative paid and reported losses by accident period to estimate ultimate losses. In addition to paid and reported development methods, for the most immature accident months, the Company uses frequency/severity techniques and methods that incorporate the initial ELR. The advantage of frequency/severity techniques is that frequency estimates are generally more stable and external information can be used to supplement internal data in estimating average severity. For personal automobile physical damage, the Company also considers gross loss, salvage and subrogation estimates to project net ultimate for recent periods.
Personal automobile liability
For personal automobile liability, and bodily injury in particular, in addition to traditional paid and reported development methods, the Company relies on frequency/severity techniques and the initial ELR. The Company generally uses the reported development method for older accident years and a combination of reported development, frequency/severity and the initial ELR for more recent accident years. For older accident periods, reported losses are a good indicator of ultimate losses given the high percentage of ultimate losses reported to date. For more recent periods, where there is more uncertainty and a higher percentage of open and unreported claims, putting some reliance on frequency/severity and initial expectations is prudent. The Company supplements these standard actuarial methods with a comprehensive review of diagnostics such as attorney representation, , settlement rates, large impacts, and case reserve adequacy. Through reviewing the standard actuarial methods and diagnostics, a estimate can be calculated that considers these results and the age of the year that is being estimated.
Commercial automobile liability
The Company performs a variety of techniques, including the paid and reported development methods and frequency/severity techniques. For older, more mature accident years, the Company primarily uses reported development techniques. For more recent accident years, the Company relies on several methods that incorporate ELR, reported loss development, paid loss development, and frequency/severity.
Professional liability
Reported and paid loss development patterns for this line tend to be volatile. Therefore, the Company typically supplements the ELR method and paid and reported development methods with others such as individual claim reviews and frequency and severity techniques.
General liability, bond and large deductible workers’ compensation
For these long-tailed lines of business, the Company generally relies on the ELR and paid and reported development techniques. The Company generally weights these techniques together, relying more heavily on the ELR method at early ages of development and shifting more weight onto paid and reported development methods as an accident year matures. The Company also uses various frequency/severity methods aimed at capturing large loss development and in some bond lines individual claim reviews are used.
Workers’ compensation
Workers’ compensation is the Company’s single largest reserve line of business and a wide range of methods are used. Due to the long-tailed nature of workers' compensation, the selection of methods is driven by ELR methods for recent accident years and then, as an accident year matures, shifting first to Bornhuetter-Ferguson and frequency/severity methods, then to paid and reported development methods, and finally to methods that are responsive to the inventory of open claims. Across these techniques, there are adjustments related to changes in emergence patterns across years, projections of future cost inflation, and outlier claims.
Marine
For marine liability, the Company generally relies on the ELR, Bornhuetter-Ferguson, and reported development techniques. The Company generally weights these techniques together, relying more heavily on the ELR method at early ages of development and then shifts towards Bornhuetter-Ferguson and then more towards the reported development method as an accident year matures. For marine property segments, the Company relies on Bornhuetter-Ferguson methods for early development ages then shifts to reported development techniques.
Assumed reinsurance and all other
Standard methods, such as ELR, Bornhuetter-Ferguson and reported development techniques are applied. These methods are informed by underlying treaty analyses supporting the ELRs, and cedant data will often inform the loss development patterns. In some instances, reserve indications may also be influenced by information gained from claims and underwriting audits. Policy quarter and policy year loss reserve estimates are then converted to an accident year basis.
Allocated loss adjustment expenses ("ALAE")
For some lines of business (e.g., professional liability, assumed reinsurance, and the acquired Navigators Group book of business), ALAE and losses are analyzed together. For most lines of business, however, ALAE is analyzed separately, using paid development techniques and a ratio of paid ALAE to paid loss applied to loss reserves to estimate unpaid ALAE.
Unallocated loss adjustment expenses
ULAE is analyzed separately from loss and ALAE. For most lines of business, future ULAE costs to be paid are projected based on a claim projection method that applies an expected claim handling cost per unit to projected claims, leveraging the anticipated claim closure pattern and the ratio of paid ULAE to paid loss applied to estimated unpaid losses. For some lines, a simplified paid-to-paid approach is used.
The recorded reserve for losses and loss adjustment expenses represents the Company's best estimate of the ultimate settlement amount of unpaid losses and loss adjustment expenses. In applying judgment, the best estimate is selected after considering the estimates derived from a number of actuarial methods, giving more weight to those methods deemed more predictive of ultimate unpaid losses and loss
adjustment expenses. The Company does not produce a statistical range or confidence interval of reserve estimates and, since reserving methods with more credibility are given greater weight, the selected best estimate may differ from the mid-point of the various estimates produced by the actuarial methods used.
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Assumptions used in arriving at the selected actuarial indications consider a number of factors, including the immaturity of emerged claims in recent accident years, emerging trends in the recent past, and the level of volatility within each line of business.
Adjustments to reserves for prior accident years are referred to as “prior accident year development”. Increases in previous estimates of ultimate loss costs are referred to as either an increase in prior accident year reserves or as unfavorable reserve development. Decreases in previous estimates of ultimate loss costs are referred to as either a decrease in prior accident year reserves or as favorable reserve development. Reserve development can influence the comparability of year over year underwriting results.
For a discussion of changes to reserve estimates recorded in 2025, see Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses in the Notes to Consolidated Financial Statements.
Current Trends Contributing to Reserve Uncertainty
The Hartford is a multi-line company in the property and casualty insurance business. The Hartford is, therefore, subject to reserve uncertainty stemming from changes in loss trends and other conditions which could become material at any point in time. As market conditions and loss trends develop, management must assess whether those conditions constitute a long-term trend that should result in a reserving action (i.e., increasing or decreasing reserves).
General liability- Within Business Insurance and Property & Casualty Other Operations, the Company has exposure to general liability claims, including from bodily injury, property damage and product liability. Reserves for these exposures can be particularly difficult to estimate due to the long development pattern and uncertainty around how cases will settle. In particular, the Company has exposure to bodily injury claims that arise from long-term or continuous exposure to harmful products or substances. Examples include, but are not limited to, pharmaceutical products, silica, talcum powder, per-and polyfluoroalkyl substances ("PFAS"),Chronic Toxic Encephalopathy ("CTE") exposures and lead paint. The Company also has exposure to claims from construction defects, where property damage or bodily injury from negligent construction is alleged. In addition, the Company has exposure to asserted religious institutions, and other organizations relating to sexual molestation and sexual . For information related to the Company's settlement agreement with the Boy Scouts of America ("BSA"), see Note 10 - Reserve for and Adjustment Expenses in the Notes to Consolidated Financial Statements. State “reviver” statutes, extending statutes of for certain sexual molestation and sexual , could result in additional or could result in sexual molestation and sexual . Such exposures may involve potentially long latency periods and may coverage in multiple policy periods, which can raise complex coverage issues with significant effects on the ultimate scope of coverage. Such exposures may also be impacted by insured . These factors make reserves for such more uncertain than other bodily or property . With regard to these exposures, the
Company monitors trends in litigation, the external environment including legislation, the similarities to other mass torts and the potential impact on the Company’s reserves. The Company also monitors the effects of legal system abuse and the impact of increased litigation funding and aggressive trial tactics by plaintiff attorneys that can introduce the risk of potentially increasing jury awards and an increase in the percentage of litigated claims. Additionally, uncertainty in estimated claim severity causes reserve variability, including the effect of changes in internal claim handling and case reserving practices.
Workers’ compensation- Included in both small business and middle & large business, workers’ compensation is the Company’s single biggest line of business, and the property and casualty line of business with the longest pattern of loss emergence. To the extent that patterns in the frequency of settlement payments deviate from historical patterns, loss reserve estimates would be less reliable. Medical costs make up approximately 50% of workers’ compensation payments. As such, reserve estimates for workers’ compensation are particularly sensitive to changes in medical inflation, the changing use of medical care procedures and changes in state legislative and regulatory environments. In addition, changes in the economic environment could reduce the ability of an injured worker to return to work and thus lengthen the time a worker receives disability benefits. In national accounts, reserves for large deductible workers’ compensation insurance require estimating losses attributable to the deductible amount that will be paid by the insured; if such losses are not paid by the insured due to financial difficulties, the Company is contractually liable.
Commercial automobile- Uncertainty in estimated claim severity causes reserve variability for commercial automobile losses including reserve variability due to changes in internal claim handling and case reserving practices as well as due to changes in the external environment, including but not limited to the impacts of legal system abuse mentioned in the general liability section above and many of the same drivers detailed in the personal automobile section below.
Directors and officers insurance- Uncertainty regarding the number and severity of security class action suits can result in reserve volatility for directors and officers insurance claims. Additionally, the Company’s exposure to losses under directors and officers insurance policies, both domestically and internationally, is primarily in excess layers, making estimates of loss more complex.
Personal automobile- While claims emerge over relatively shorter periods, estimates can still vary due to a number of factors, including uncertain estimates of frequency and severity trends. Severity trends are influenced by internal factors such as claim handling and case reserving practices, as well as external conditions including supply chain stability, which affect parts and labor costs. Severity trends can also be impacted by legal system abuse whereby increased litigation funding and aggressive trial tactics by plaintiff attorneys can introduce the risk of potentially increasing jury awards and an increase in the percentage of litigated claims. Changes in claim practices increase the uncertainty in the interpretation of case reserve data, which increases the uncertainty in recorded reserve levels. Recent accident years have exhibited shifts in claim severity development, influenced by factors such as higher costs for advanced vehicle components and attorney
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involvement, raising uncertainty about the reliability of historical patterns. In addition, the introduction of new products and class plans can lead to a different mix of business by type of insured than the Company experienced in the past. Changes in mix increase the uncertainty of the reserve projections since historical data and reporting patterns may not be applicable to the new business.
Assumed reinsurance- While pricing and reserving processes can be challenging and idiosyncratic for insurance companies, the inherent uncertainties of setting prices and estimating such reserves are even greater for the reinsurer. This is primarily due to the longer time between the date of an occurrence and the reporting of claims to the reinsurer, the diversity of development patterns among different types of reinsurance treaties or contracts, the necessary reliance on the ceding companies for information regarding reported claims and differing pricing and reserving practices among ceding companies. In addition, trends that have affected development of liabilities in the past may not necessarily occur or impact liability development in the same manner or to the same degree in the future. As a result, actual losses and LAE may deviate, perhaps substantially, from the expected estimates.
International business- In addition to several of the line-specific trends listed above, international business may have additional uncertainty due to geopolitical, foreign currency, and trade dispute risks.
Catastrophes- Within Business Insurance and Personal Insurance, the Company is exposed to losses from catastrophe events, primarily for damage to property. Reserves for hurricanes, tropical storms, tornado/hail, wildfires, earthquakes and other catastrophe events are subject to significant uncertainty about the number and average severity of claims arising from those events, particularly in cases where the event occurs near the end of a financial reporting period when there is limited information about the extent of damages. For example, after a catastrophe event, it may take a period of time before we are able to access the impacted areas limiting the ability of our claims adjusting staff to inspect losses, make estimates and determine the damages that are covered by the policy. To estimate , we consider information from claim notices received to date, third party data, visual images of the affected area where we have exposures and our own historical experience of reporting patterns for similar events.
Impact of Key Assumptions on Reserves
As stated above, the Company’s practice is to estimate reserves using a variety of methods, assumptions, and data elements within its reserve estimation. The Company does not use statistical loss distributions or confidence levels in the process of determining its reserve estimate and, as a result, does not disclose reserve ranges.
Across most lines of business, the most important reserve assumptions are future loss development factors applied to paid or reported losses to date. The trend in loss cost frequency and severity is also a key assumption, particularly in the most recent accident years, where loss development factors are less credible.
The following discussion discloses possible variation from current estimates of loss reserves due to a change in certain
key indicators of potential losses. For automobile liability lines in both Personal Insurance and Business Insurance, the key indicator is the annual loss cost trend, particularly the severity trend component of loss costs. For workers’ compensation and general liability, loss development patterns are a key indicator, particularly for more mature accident years. For workers’ compensation, paid loss development patterns have been impacted by medical cost inflation and other changes in loss cost trends. For general liability, incurred loss development patterns have been impacted by, among other things, emergence of new types of claims (e.g., PFAS claims) and a shift in the mixture between smaller, more routine claims and larger, more complex claims.
Each of the impacts described below is estimated individually, without consideration for any correlation among key indicators or among lines of business. Therefore, it would be inappropriate to take each of the amounts described below and add them together in an attempt to estimate volatility for the Company’s reserves in total. For any one reserving line of business, the estimated variation in reserves due to changes in key indicators is a reasonable estimate of potential reserve development that may occur in the future, likely over a period of several calendar years. The variation discussed is not meant to be a worst-case scenario, and, therefore, it is possible that future variation may be more than the amounts discussed below. Moreover, the variation discussed does not represent a statistical range of potential reserve outcomes, and factors exist beyond the key indicators considered which have the potential to drive additional variation to the Company's reserves.
Possible Change in Key Indicator
Reserves, Net of Reinsurance December 31, 2025
Estimated Range of Potential Reserve Development
Personal Automobile
Liability
+/- 2.5 points to the annual assumed change in loss cost severity for the two most recent accident years
$1.7 billion
Commercial Automobile Liability
+/- 2.5 points to the annual assumed change in loss cost severity for the two most recent accident years
$1.8 billion
Workers' Compensation
2.5% change in paid loss development patterns
$13.1 billion
General Liability
8% change in reported loss development patterns
$6.4 billion
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Reserving for Asbestos and Environmental Claims
How A&E Reserves are Set- The process for establishing reserves for asbestos and environmental claims first involves estimating the required reserves gross of ceded reinsurance and then estimating reinsurance recoverables.
In establishing reserves for gross asbestos claims, the Company evaluates its insureds’ estimated liabilities for such claims by examining exposures for individual insureds and assessing how coverage applies. The Company considers a variety of factors, including the jurisdictions where underlying claims have been brought, past, pending and anticipated future claim activity, the level of plaintiff demands, disease mix, past settlement values of similar claims, dismissal rates, allocated loss adjustment expense, and potential impact of other defendants being in bankruptcy.
Similarly, the Company reviews exposures to establish gross environmental reserves. The Company considers several factors in estimating environmental liabilities, including historical values of similar claims, the number of sites involved, the insureds’ alleged activities at each site, the alleged environmental damage, the respective shares of liability of potentially responsible parties, the appropriateness and cost of remediation, the nature of governmental enforcement activities or mandated remediation efforts and potential impact of other defendants being in bankruptcy.
After evaluating its insureds’ probable liabilities for asbestos and/or environmental claims, the Company evaluates the insurance coverage in place for such claims. The Company considers its insureds’ total available insurance coverage, including the coverage issued by the Company. The Company also considers relevant judicial interpretations of policy language, the nature of how policy limits are enforced on multi-year policies and applicable coverage defenses or determinations, if any.
The estimated liabilities of insureds and the Company’s exposure to the insureds depend heavily on an analysis of the relevant legal issues and litigation environment. This analysis is conducted by the Company’s lawyers and is subject to applicable privileges.
For both asbestos and environmental reserves, the Company also analyzes its historical paid and reported losses and expenses year by year, to assess any emerging trends, fluctuations or characteristics suggested by the aggregate paid and reported activity. The historical losses and expenses are analyzed on both a direct basis and net of reinsurance.
Once the gross ultimate exposure for indemnity and allocated loss adjustment expense is determined for its insureds by each policy year, the Company calculates its ceded reinsurance
recoverables based on any applicable facultative and treaty reinsurance and the Company’s experience with reinsurance collections. See the section that follows entitled A&E Adverse Development Cover that discusses the impact the reinsurance agreement with NICO may have on future adverse development of asbestos and environmental reserves, if any.
Uncertainties Regarding Adequacy of A&E Reserves- A number of factors affect the variability of estimates for gross asbestos and environmental reserves including assumptions with respect to the frequency of claims, the average severity of those claims settled with payment, the dismissal rate of claims with no payment, resolution of coverage disputes with our policyholders and the expense to indemnity ratio. Reserve estimates for gross asbestos and environmental reserves are subject to greater variability than reserve estimates for more traditional exposures.
The process of estimating asbestos and environmental reserves remains subject to a wide variety of uncertainties, which are detailed in Note 14 - Commitments and Contingencies of Notes to Consolidated Financial Statements. The Company believes that its current asbestos and environmental reserves are appropriate. Future developments could continue to cause the Company to change its estimates of its gross asbestos and environmental reserves. Losses ceded under the adverse development cover ("A&E ADC") with NICO in excess of the ceded premium paid of $650 have resulted in a deferred gain resulting in a timing difference between when gross reserves are increased and when reinsurance recoveries are recognized. This timing difference results in a charge to net income until such periods when the recoveries are recognized. Consistent with past practice, the Company will continue to monitor its reserves in Property & Casualty Other Operations regularly, including its annual reviews of asbestos liabilities, reinsurance recoverables, the allowance for uncollectible reinsurance, and environmental liabilities. Where future developments indicate, we will make appropriate adjustments to the reserves at that time.
Total P&C Insurance Product Reserves Development
In the opinion of management, based upon the known facts and current law, the reserves recorded for the Company’s property and casualty insurance products at December 31, 2025 represent the Company’s best estimate of its ultimate liability for unpaid losses and loss adjustment expenses. However, because of the significant uncertainties surrounding reserves, it is possible that management’s estimate of the ultimate liabilities for these claims may change in the future and that the required adjustment to currently recorded reserves could be material to the Company’s results of operations or liquidity.
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Rollforward of Property and Casualty Insurance Product Liabilities for Unpaid Losses and LAE for the Year Ended December 31, 2025
Business Insurance
Personal
Insurance
Property & Casualty Other Operations
Total Property & Casualty Insurance
Beginning liabilities for unpaid losses and loss adjustment expenses, gross
Reinsurance and other recoverables
Beginning liabilities for unpaid losses and loss adjustment expenses, net
Provision for unpaid losses and loss adjustment expenses
Current accident year before catastrophes
Current accident year catastrophes
Prior accident year development
Total provision for unpaid losses and loss adjustment expenses
Change in deferred gain on retroactive reinsurance included in the provision for the period but reflected in other liabilities
Payments
Foreign currency adjustment
Ending liabilities for unpaid losses and loss adjustment expenses, net
Reinsurance and other recoverables
Ending liabilities for unpaid losses and loss adjustment expenses, gross
Earned premiums and fee income
Loss and loss adjustment expense paid ratio [1]
Loss and loss adjustment expense ratio
Prior accident year development (pts) [2]
[1] The “loss and loss adjustment expense paid ratio” represents the ratio of paid losses and loss adjustment expenses to earned premiums and fee income.
[2] “Prior accident year development (pts)” represents the ratio of prior accident year development to earned premiums.
Current Accident Year Catastrophe Losses for the Year Ended December 31, 2025, Net of Reinsurance
Business Insurance
Personal
Insurance
Total
Wind and hail
Winter storms
Hurricanes and tropical storms
Wildfires [1]
Other international
Catastrophes before assumed reinsurance
Global assumed reinsurance business [1] [2]
Total catastrophe losses
[1] Includes losses from the January 2025 California Wildfire Event of $305, net of reinsurance, including losses of $50 in the global assumed reinsurance business.
[2] Catastrophe losses incurred on global assumed reinsurance business are not covered under the Company's aggregate property catastrophe treaty. For further information on the treaty, refer to Enterprise Risk Management — Insurance Risk section of this MD&A.
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Unfavorable (Favorable) Prior Accident Year Development for the Year Ended December 31, 2025
Business Insurance
Personal
Insurance
Property & Casualty Other Operations
Total Property & Casualty Insurance
Workers’ compensation
Workers’ compensation discount accretion
General liability
Marine
Package business
Commercial property
Professional liability
Bond
Assumed reinsurance
Automobile liability
Homeowners
Net asbestos and environmental reserves
Catastrophes
Uncollectible reinsurance
Other reserve re-estimates, net [1]
Prior accident year development before change in deferred gain
Change in deferred gain on retroactive reinsurance included in other liabilities [2]
Total prior accident year development
[1] Other reserve re-estimates, net for the year ended December 31, 2025 includes favorable change of $(34) in personal automobile physical damage reserves.
[2] The $(64) change in deferred gain on retroactive reinsurance for the year ended December 31, 2025 is related to amortization of the Navigators ADC deferred gain under retroactive reinsurance accounting. As of December 31, 2025, the deferred gain on the Navigators ADC has been fully amortized.
For discussion of the factors contributing to unfavorable (favorable) prior accident year reserve development for 2025, please refer to Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Consolidated Financial Statements.i
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Rollforward of Property and Casualty Insurance Product Liabilities for Unpaid Losses and LAE for the Year Ended December 31, 2024
Business Insurance
Personal
Insurance
Property & Casualty Other Operations
Total Property & Casualty Insurance
Beginning liabilities for unpaid losses and loss adjustment expenses, gross
Reinsurance and other recoverables
Beginning liabilities for unpaid losses and loss adjustment expenses, net
Provision for unpaid losses and loss adjustment expenses
Current accident year before catastrophes
Current accident year catastrophes
Prior accident year development
Total provision for unpaid losses and loss adjustment expenses
Change in deferred gain on retroactive reinsurance included in
other liabilities
Payments
Foreign currency adjustment
Ending liabilities for unpaid losses and loss adjustment expenses, net
Reinsurance and other recoverables
Ending liabilities for unpaid losses and loss adjustment expenses, gross
Earned premiums and fee income
Loss and loss adjustment expense paid ratio [1]
Loss and loss adjustment expense ratio
Prior accident year development (pts) [2]
[1] The “loss and loss adjustment expense paid ratio” represents the ratio of paid losses and loss adjustment expenses to earned premiums and fee income.
[2] “Prior accident year development (pts)” represents the ratio of prior accident year development to earned premiums.
Current Accident Year Catastrophe Losses for the Year Ended December 31, 2024, Net of Reinsurance
Business Insurance
Personal
Insurance
Total
Wind and hail
Winter storms
Hurricanes and tropical storms [1]
Wildfires
Other international
Catastrophes before assumed reinsurance
Global assumed reinsurance business [2]
Total catastrophe losses
[1] Includes losses from Hurricane Helene of $121, net of reinsurance, including $20 of hurricane losses in the global assumed reinsurance business.
[2] Catastrophe losses incurred on global assumed reinsurance business are not covered under the Company's aggregate property catastrophe treaty. For further information on the treaty, refer to Enterprise Risk Management — Insurance Risk section of this MD&A.
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Unfavorable (Favorable) Prior Accident Year Development for the Year Ended December 31, 2024
Business Insurance
Personal
Insurance
Property & Casualty Other Operations
Total Property & Casualty Insurance
Workers’ compensation
Workers’ compensation discount accretion
General liability
Marine
Package business
Commercial property
Professional liability
Bond
Assumed reinsurance
Automobile liability
Homeowners
Net asbestos and environmental reserves [1]
Catastrophes
Uncollectible reinsurance
Other reserve re-estimates, net [2]
Prior accident year development before change in deferred gain
Change in deferred gain on retroactive reinsurance included in other liabilities [1][3]
Total prior accident year development
[1] The 2024 A&E reserve review resulted in an increase in reserves before ADC reinsurance of $203, for which $62 was recorded as a deferred gain on retroactive reinsurance.
[2] Other reserve re-estimates, net for the year ended December 31, 2024 includes a favorable change of $(32) in personal automobile physical damage reserves.
[3] The $145 change in deferred gain on retroactive reinsurance for the year ended December 31, 2024 is related to amortization of the Navigators ADC deferred gain under retroactive reinsurance accounting.
For discussion of the factors contributing to unfavorable (favorable) prior accident year reserve development for 2024, please refer to Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Consolidated Financial Statements.
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Rollforward of Property and Casualty Insurance Product Liabilities for Unpaid Losses and LAE for the Year Ended December 31, 2023
Business Insurance
Personal
Insurance
Property & Casualty Other Operations
Total Property & Casualty Insurance
Beginning liabilities for unpaid losses and loss adjustment expenses, gross
Reinsurance and other recoverables
Beginning liabilities for unpaid losses and loss adjustment expenses, net
Provision for unpaid losses and loss adjustment expenses
Current accident year before catastrophes
Current accident year catastrophes
Prior accident year development
Total provision for unpaid losses and loss adjustment expenses
Change in deferred gain on retroactive reinsurance included in
other liabilities
Payments [1]
Foreign currency adjustment
Ending liabilities for unpaid losses and loss adjustment expenses, net
Reinsurance and other recoverables
Ending liabilities for unpaid losses and loss adjustment expenses, gross
Earned premiums and fee income
Loss and loss adjustment expense paid ratio [2]
Loss and loss adjustment expense ratio
Prior accident year development (pts) [3]
[1] Includes the $787 settlement paid to the BSA on April 20, 2023. For further information, see "Settlement Agreement with Boy Scouts of America" in Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Consolidated Financial Statements.
[2] The “loss and loss adjustment expense paid ratio” represents the ratio of paid losses and loss adjustment expenses to earned premiums and fee income.
[3] “Prior accident year development (pts)” represents the ratio of prior accident year development to earned premiums.
Current Accident Year Catastrophe Losses for the Year Ended December 31, 2023, Net of Reinsurance
Business Insurance
Personal
Insurance
Total
Wind and hail
Winter storms
Hurricanes and tropical storms
Wildfires
Other international
Catastrophes before assumed reinsurance
Global assumed reinsurance business [1]
Total catastrophe losses
[1] Catastrophe losses incurred on global assumed reinsurance business are not covered under the Company's aggregate property catastrophe treaty. For further information on the treaty, refer to Enterprise Risk Management — Insurance Risk section of this MD&A.
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Unfavorable (Favorable) Prior Accident Year Development for the Year Ended December 31, 2023
Business Insurance
Personal
Insurance
Property & Casualty Other Operations
Total Property & Casualty Insurance
Workers’ compensation
Workers’ compensation discount accretion
General liability
Marine
Package business
Commercial property
Professional liability
Bond
Assumed reinsurance
Automobile liability
Homeowners
Net asbestos and environmental reserves [1]
Catastrophes
Uncollectible reinsurance
Other reserve re-estimates, net [2]
Prior accident year development before change in deferred gain
Change in deferred gain on retroactive reinsurance included in other liabilities [1]
Total prior accident year development
[1] The year ended December 31, 2023 included $194 of adverse development on net asbestos and environmental reserves that was ceded to NICO but for which the Company recorded a deferred gain on retroactive reinsurance.
[2] Other reserve re-estimates, net for the year ended December 31, 2023 includes an unfavorable change of $22 in personal automobile physical damage reserves.
For discussion of the factors contributing to unfavorable (favorable) prior accident year reserve development for 2023 please refer to Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Consolidated Financial Statements.
Property & Casualty Other Operations
Net reserves and reserve activity in Property & Casualty Other Operations are categorized and reported as asbestos, environmental, and “all other”. The “all other” category of reserves covers a wide range of insurance and assumed reinsurance coverages, including, but not limited to, potential liability for lead paint, silica, pharmaceutical products, head injuries, sexual molestation and sexual abuse and other long-tail liabilities. In addition to various insurance and assumed reinsurance exposures, "all other" includes unallocated loss adjustment expense reserves. "All other" also includes the Company’s allowance for uncollectible reinsurance. When the Company commutes a ceded reinsurance contract or settles a ceded reinsurance dispute, net reserves for the related cause of
loss (including asbestos, environmental or all other) are increased for the portion of the allowance for uncollectible reinsurance attributable to that commutation or settlement.
Asbestos and Environmental Reserves
The vast majority of the Company's exposure to A&E relates to policy coverages provided prior to 1986 and is reported within the P&C Other Operations segment (“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 Business Insurance and Personal Insurance segments, respectively.
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Run-off A&E Summary as of December 31, 2025
Asbestos
Environmental
Total Run-off A&E
Gross
Direct
Assumed Reinsurance
Total
Ceded- other than NICO
Total net reserves, before ceded losses to NICO
Ceded - NICO A&E ADC "Run-off"
Net
Rollforward of Run-off A&E Losses and LAE
Asbestos
Environmental
Total Run-off A&E
Beginning net reserves before reinsurance recoverable from NICO
Losses and loss adjustment expenses incurred
Losses and loss adjustment expenses paid
Reallocation of intersegment balances [1]
Reclassification of allowance for uncollectible reinsurance [2]
Ending net reserves before reinsurance recoverable from NICO
Reinsurance recoverable from NICO A&E ADC [3]
Ending net reserves
Beginning net reserves before reinsurance recoverable from NICO
Losses and loss adjustment expenses incurred before ceding to NICO A&E ADC
Losses and loss adjustment expenses paid
Reclassification of allowance for uncollectible reinsurance [2]
Ending net reserves before reinsurance recoverable from NICO and intersegment balances
Reinsurance recoverable from NICO A&E ADC and intersegment balances
Ending net reserves
Beginning net reserves before reinsurance recoverable from NICO
Losses and loss adjustment expenses incurred before ceding to NICO A&E ADC
Losses and loss adjustment expenses paid
Reclassification of allowance for uncollectible reinsurance [2]
Ending net reserves before reinsurance recoverable from NICO and intersegment balances
Reinsurance recoverable from NICO A&E ADC and intersegment balances
Ending liability — net
[1] Represents a reallocation of expected A&E ADC recoveries from Run-off A&E primarily to Business Insurance.
[2] Related to the reclassification of an allowance for uncollectible reinsurance from the "all other" category of P&C Other Operations reserves.
[3] In addition to the $1,436 billion of ceded unpaid reinsurance loss and LAE recoverables related to the A&E ADC, the Company has also recorded $64 of paid reinsurance loss and LAE recoverables related to the A&E ADC on the Consolidated Balance Sheet as of December 31, 2025.
A&E Adverse Development Cover
Effective December 31, 2016, the Company entered into an A&E ADC reinsurance agreement with NICO to reduce uncertainty regarding potential adverse development. Under the A&E ADC, the Company paid a reinsurance premium of $650 for NICO to assume adverse net loss and allocated loss adjustment expense reserve development up to $1.5 billion above the Company’s existing net A&E reserves as of December 31, 2016 of approximately $1.7 billion, including both
Run-off A&E and A&E reserves in Business Insurance and Personal Insurance. The $650 reinsurance premium was placed in a collateral trust account as security for NICO’s claim payment obligations to the Company. The Company has retained the risk of collection on amounts due from other third-party reinsurers and through 2025 continued to be responsible for claims handling and other administrative services, subject to certain conditions. The A&E ADC covered substantially all the
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Company’s A&E reserve development up to the reinsurance limit, which as of December 31, 2025, has been exhausted.
Under retroactive reinsurance accounting, net adverse A&E reserve development after December 31, 2016 results in an offsetting reinsurance recoverable up to the $1.5 billion limit. Cumulative ceded losses up to the $650 reinsurance premium paid have been recognized as a dollar-for-dollar offset to direct losses incurred. Cumulative ceded losses exceeding the $650 reinsurance premium paid have resulted in a deferred gain. As of December 31, 2025, the Company has exhausted the treaty limit and incurred a cumulative $1.5 billion in adverse development on A&E reserves that have been ceded under the A&E ADC treaty with NICO, all within Run-off A&E. As such, no remaining coverage is available for any future adverse net reserve development, which may be significant. The Company has recorded a $850 deferred gain within other liabilities, representing the difference between the reinsurance recoverable of $1.5 billion and ceded premium paid of $650. As of December 31, 2025, the Company has paid cumulative losses in excess of the $1.7 billion attachment point. The Company has recorded $1,436 of ceded reinsurance and LAE recoverables and $64 of paid reinsurance and LAE recoverables related to the A&E ADC on the Consolidated Balance Sheet as of December 31, 2025. T he
deferred gain will be recognized over the claim settlement period in the proportion of the amount of cumulative ceded losses collected from the reinsurer to the estimated ultimate reinsurance recoveries.
Net and Gross Survival Ratios
Net and gross survival ratios are a measure of the quotient of the carried reserves divided by average annual payments (net of reinsurance and on a gross basis) and is an indication of the number of years that carried reserves would last (i.e., survive) if future annual payments were consistent with the calculated historical average.The net survival ratios presented in the table below are calculated before considering the effect of the A&E ADC reinsurance agreement but net of other reinsurance in place.
Net and Gross Survival Ratios
Asbestos
Environmental
One year net survival ratio
Three year net survival ratio
One year gross survival ratio
Three year gross survival ratio
Run-off A&E Paid and Incurred Losses and LAE Development
Asbestos
Environmental
Total A&E
Paid Losses & LAE
Incurred Losses & LAE
Paid Losses & LAE
Incurred Losses & LAE
Paid Losses & LAE
Incurred Losses & LAE
Gross
Ceded- other than NICO
Net - Gross of ADC
Ceded - NICO A&E ADC
Net
Gross
Ceded- other than NICO
Net - Gross of ADC
Ceded - NICO A&E ADC
Net
Gross
Ceded- other than NICO
Net - Gross of ADC
Ceded - NICO A&E ADC
Net
Annual Reserve Reviews
Review of Asbestos and Environmental Reserves
The Company performs its regular comprehensive annual review of asbestos and environmental reserves in the fourth quarter, including both Run-off A&E (P&C Other Operations) and asbestos and environmental reserves included in Business Insurance and Personal Insurance. As part of the evaluation of asbestos and environmental reserves in the fourth quarter of
2025, the Company reviewed all of its open direct domestic insurance accounts exposed to asbestos and environmental liability, as well as assumed reinsurance accounts.
2025 comprehensive annual reviews
As a result of the 2025 fourth quarter review, the Company increased asbestos and environmental reserves by a total of $165 in P&C Other Operations, which included increases of $122 and $43 for asbestos and environmental reserves, respectively. The increase in asbestos reserves was primarily driven by higher-than-expected frequency, an increase in claim
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settlement rates, and higher settlement values for a subset of accounts. The increase in environmental reserves was due to higher environmental site cleanup and monitoring costs and higher legal expenses.
2024 comprehensive annual reviews
As a result of the 2024 fourth quarter review, the Company increased asbestos reserves before NICO reinsurance by $167 in P&C Other Operations, primarily driven by higher-than-expected frequency, higher settlement values for certain accounts, an increase in the Company’s share of liability due to insolvencies and cost sharing agreements and an increase in claim settlement rates.
As a result of the 2024 fourth quarter review, the Company increased environmental reserves before NICO reinsurance by $36 in P&C Other Operations, primarily due to higher severity on recently emerged accounts, higher environmental site cleanup and monitoring costs, and higher legal expenses.
The total $203 increase in asbestos and environmental reserves was charged to earnings in 2024 within P&C Other Operations, which includes $62 that was ceded to the NICO ADC and recorded as a deferred gain under retroactive reinsurance accounting. As of December 31, 2024, the Company ceded the cumulative treaty limit of $1.5 billion.
For information regarding the 2023 comprehensive annual review, refer to Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in The Hartford’s 2024 Form 10-K Annual Report.
Review of "All Other" Reserves in Property & Casualty Other Operations
Prior year development on all other reserves resulted in increases of $31, $16 and $30, respectively for calendar years 2025, 2024 and 2023. Included in the 2025 adverse reserve development was an increase in ULAE reserves, primarily due to an increase in expected aggregate claim handling costs associated with asbestos and environmental claims.
The Company provides an allowance for uncollectible reinsurance, reflecting management’s best estimate of reinsurance cessions that may be uncollectible in the future due to reinsurers’ unwillingness or inability to pay. In performing its assessment, the Company evaluates the collectibility of the reinsurance recoverables and the adequacy of the allowance for uncollectible reinsurance associated with older, long-term casualty liabilities reported in Property & Casualty Other Operations. In conducting these evaluations, the Company used its most recent detailed evaluations of ceded liabilities reported in the segment. The Company analyzed the overall credit quality of the Company’s reinsurers, recent trends in arbitration and litigation outcomes in disputes between cedants and reinsurers, and recent developments in commutation activity between reinsurers and cedants. As of 2025, 2024, and 2023 the allowance for uncollectible reinsurance for Property & Casualty Other Operations totaled $37, $41 and $53, respectively. Due to the inherent uncertainties as to collection and the length of time before reinsurance recoverables become due, particularly for older, long-term casualty liabilities, it is possible that future adjustments to the Company’s reinsurance recoverables, net of the allowance, could be required.
Impact of Re-estimates on Property & Casualty Insurance Product Reserves
Estimating property and casualty insurance product reserves uses a variety of methods, assumptions and data elements. Ultimate losses may vary materially from the current estimates. Many factors can contribute to these variations and the need to change the previous estimate of required reserve levels. Prior accident year reserve development is generally due to the emergence of additional facts that were not known or anticipated at the time of the prior reserve estimate and/or due to changes in interpretations of information and trends.
The table below shows the range of annual reserve re-estimates experienced by The Hartford over the past ten years. The range of prior accident year development shown in the table below is net of losses ceded, including losses ceded under two adverse
development cover reinsurance agreements with NICO. The amount of prior accident year development (as shown in the reserve rollforward) for a given calendar year is expressed as a percent of the beginning calendar year reserves, net of reinsurance. The ranges presented are significantly influenced by the facts and circumstances of each particular year and by the fact that only the last ten years are included in the range. Accordingly, these percentages are not intended to be a prediction of the range of possible future variability. For further discussion of the potential for variability in recorded loss reserves, see Preferred Reserving Methods by Line of Business and Impact of Key Assumptions on Reserves sections.
Range of Prior Accident Year Unfavorable (Favorable) Development for the Ten Years Ended December 31, 2025
Business Insurance
Personal
Insurance
Property & Casualty Other Operations
Total Property & Casualty [1]
Annual range of prior accident year unfavorable (favorable) development for the ten years ended December 31, 2025
[1] Excluding the reserve increases for asbestos and environmental reserves, over the past ten years, reserve re-estimates for total property and casualty insurance ranged from (1.9%) to 1.0%.
The potential variability of the Company’s property and casualty insurance product reserves would normally be expected to vary by segment and the types of loss exposures insured by those
segments. Illustrative factors influencing the potential reserve variability for each of the segments are discussed under Critical Accounting Estimates for Property & Casualty Insurance
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Product Reserves, Net of Reinsurance and Asbestos and Environmental Reserves. See the section entitled Property & Casualty Other Operations, Annual Reserve Reviews about the
impact that the A&E ADC retroactive reinsurance agreement with NICO has on net reserve changes of asbestos and environmental reserves.
Employee Benefit LTD Reserves, Net of Reinsurance
The Company establishes reserves for group life and accident & health contracts, including long-term disability coverage, for both reported claims and claims related to insured events that the Company estimates have been incurred but have not yet been reported. As long-term disability reserves are long-tail claim liabilities, they are discounted because the payment pattern and the ultimate costs are reasonably fixed and determinable on an individual claim basis. The Company held $6,592 and $6,609 of LTD unpaid losses and loss adjustment expenses, net of reinsurance, as of December 31, 2025 and 2024, respectively.
Reserving Methodology
How Reserves are Set - A Disabled Life Reserve ("DLR") is calculated for each LTD claim. The DLR for each claim is the expected present value of all future benefit payments starting with the known monthly gross benefit which is reduced for estimates of the expected claim recovery due to return to work or claimant death, offsets from other income including offsets from Social Security benefits, and discounting, where the discount rate is tied to expected investment yield at the time the claim is incurred. Estimated future benefit payments represent the monthly income benefit that is paid until recovery, death or expiration of benefits. Claim recoveries are estimated based on claim characteristics such as age and diagnosis and represent an estimate of benefits that will terminate, generally as a result of the claimant returning to work or being deemed able to return to work. For claims recently closed due to recovery, a portion of the DLR is retained for the possibility that the claim reopens upon further evidence of disability. In addition, a reserve for estimated unpaid claim expenses is included in the DLR.
The DLR also includes a liability for potential payments to pending claimants beyond the elimination period who have not yet been approved for LTD. In these cases, the present value of future benefits is reduced for the likelihood of claim denial based on Company experience.
Estimates for IBNR claims are made by applying completion factors to expected emerged experience by line of business. Included within IBNR are bulk reserves for claims reported but still within the waiting period until benefits are paid, typically 3 or 6 months depending on the contract. Completion factors are derived from standard actuarial techniques using triangles that display historical claim count emergence by incurral month. These estimates are reviewed for reasonableness and are adjusted for current trends and other factors expected to cause a change in claim emergence. The reserves include an estimate of unpaid claim expenses, including a provision for the cost of initial set-up of the claim once reported.
For all products, including LTD, there is a period generally ranging from two to twelve months, depending on the product and line of business, where emerged claims for an incurral year are not yet credible enough to be a basis for estimating reserves. In these cases, the ultimate loss is estimated using earned premium multiplied by an expected loss ratio based on
pricing assumptions of claim incidence, claim severity, and earned pricing adjusted for emerging trends as needed.
Impact of Key Assumptions on Reserves
The key assumptions affecting long-term disability, which is the largest reserve within Employee Benefits, include:
Discount Rate - The discount rate is the interest rate at which expected future claim cash flows are discounted to determine the present value. A higher selected discount rate results in a lower reserve. If the discount rate is higher than our future investment returns, our invested assets will not earn enough investment income to cover the discount accretion on our claim reserves which would negatively affect our profits. For each incurral year, the discount rates are estimated based on investment yields expected to be earned net of investment expenses. The incurral year is the year in which the claim is incurred and the estimated settlement pattern is determined. Once established, discount rates for each incurral year are unchanged except that LTD reserves assumed from the acquisition of Aetna's U.S. group life and disability business are all discounted using rates as of the November 1, 2017 acquisition date. The weighted average discount rates on LTD reserves were 3.5% and 3.3% in 2025 and 2024, respectively. Had the discount rate for each incurral year been 10 basis points lower at the time they were established, our LTD unpaid loss and loss adjustment expense reserves would be higher by $28, before tax, as of December 31, 2025.
Claim Termination Rates (inclusive of mortality, recoveries, and expiration of benefits) - Claim termination rates are an estimate of the rate at which claimants will cease receiving benefits during a given calendar year. Terminations result from a number of factors, including death, recoveries and expiration of benefits. The probability that benefits will terminate in each future month for each claim is estimated using a predictive model that uses past Company experience, contract provisions, job characteristics and other claimant-specific characteristics such as diagnosis, time since disability began, and age. Actual claim termination experience will vary from period to period. Over the past 10 years, claim termination rates for a single incurral year have generally increased and have ranged from 7% below to 7% above current assumptions over that time period. For a single recent incurral year (such as 2025), a one percent decrease in our assumption for LTD claim termination rates would increase our reserves by $13. For all incurral years combined, as of December 31, 2025, a one percent decrease in our assumption for our LTD claim rates would increase our Employee Benefits and adjustment expense reserves by $29.
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Current Trends Contributing to Reserve Uncertainty
We have observed delays in the Social Security Administration’s processing of disability claims, which reduces or slows down the recognition of offsets to claimant benefits. If we have a downturn in the economy and/or in employment levels, we could experience an increase in claim incidence on long-term disability claims.
By investing in fixed income securities of similar duration to our liabilities, we hedge our interest rate exposure over a three year period at the time we price and sell long-term disability policies given average three year rate guarantees. Our discount rate assumption for the 2025 incurral year is up from that of the 2024 incurral year.
Evaluation of Goodwill for Impairment
Goodwill balances are reviewed for impairment at least annually, or more frequently if events occur or circumstances change that would indicate that a triggering event for a potential impairment has occurred. The recognition and measurement of goodwill impairment is based on the excess of the carrying value of the reporting unit over its estimated fair value, up to the amount of the reporting unit’s goodwill.
The estimated fair value of each reporting unit incorporates multiple inputs into discounted cash flow calculations including assumptions that market participants would make in valuing the reporting unit. Assumptions include levels of economic capital, future business growth, earnings projections, assets under management for Hartford Funds and the weighted average cost of capital used for purposes of discounting. Decreases in business growth, decreases in earnings projections and increases in the weighted average cost of capital will all cause a
reporting unit’s fair value to decrease, increasing the possibility of impairment.
A reporting unit is defined as an operating segment or one level below an operating segment. The Company’s reporting units to which goodwill has been allocated consist of Business Insurance, Personal Insurance, Employee Benefits and Hartford Funds.
The annual goodwill assessment for all reporting units was completed as of October 31, 2025, and resulted in no write-downs of goodwill for the year ended December 31, 2025. All reporting units passed the annual impairment test with a significant margin. For information on goodwill see Note 9 - Goodwill & Other Intangible Assets of Notes to Consolidated Financial Statements.
Valuation of Investments and Derivative Instruments
Fixed Maturities, Equity Securities, Short-term Investments, and Derivatives
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 which are listed in priority order: quoted prices, prices from third-party pricing services, internal matrix pricing, and independent broker quotes. The fair values of derivative instruments are determined primarily using a discounted cash flow model or option model technique and incorporate counterparty credit risk. In some cases, quoted market prices for exchange-traded transactions and transactions cleared through central clearing houses ("OTC-cleared") may be used and in other cases independent broker quotes may be used. For further discussion, see the Fixed Maturities, Equity Securities, Short-term Investments, and
Derivatives section in Note 4 - Fair Value Measurements of Notes to Consolidated Financial Statements.
Evaluation of Credit Losses on Fixed Maturities, AFS and ACL on Mortgage Loans
Each quarter, a committee of investment and accounting professionals evaluates investments to determine if a credit loss is present for fixed maturities, AFS or an ACL is required for mortgage loans. This evaluation is a quantitative and qualitative process, which is subject to risks and uncertainties. For further discussion of the accounting policies, see the Significant Accounting Policies Section in Note 1 - Basis of Presentation and Significant Accounting Policies of Notes to Consolidated Financial Statements. For a discussion of credit losses recorded, see the Credit Losses on Fixed Maturities, AFS and Intent-to-Sell Impairments and ACL on Mortgage Loans sections within the Investment Portfolio Risk section of the MD&A.
Contingencies Relating to Corporate Litigation and Regulatory Matters
Management evaluates each contingent matter separately. A loss is recorded if probable and reasonably estimable. Management establishes reserves 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 reserve at the low end of the range of losses.
The Company has a quarterly monitoring process involving legal and accounting professionals. Legal personnel first identify outstanding corporate litigation and regulatory matters posing a reasonable possibility of loss. These matters are then jointly reviewed by accounting and legal personnel to evaluate the facts and changes since the last review in order to determine if a
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provision for loss should be recorded or adjusted, the amount that should be recorded, and the appropriate disclosure. The outcomes of certain contingencies currently being evaluated by the Company, which relate to corporate litigation and regulatory matters, are inherently difficult to predict, and the reserves that have been established for the estimated settlement amounts are subject to significant changes. 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 Company. In view of the uncertainties regarding the outcome of these matters, as well as the tax-deductibility of payments, it is possible that the ultimate cost to the Company of these matters could exceed the reserve by an amount that would have a material adverse effect on the Company’s consolidated results of operations or liquidity in a particular quarterly or annual period.
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Reportable Segment and Corporate Operating Summaries
Business Insurance - Results of Operations
Underwriting Summary
Increase (Decrease) From 2024 to 2025
Increase (Decrease) From 2023 to 2024
Written premiums
Change in unearned premium reserve
Earned premiums
Fee income
Losses and loss adjustment expenses
Current accident year before catastrophes
Current accident year catastrophes [1]
Prior accident year development [1]
Total losses and loss adjustment expenses
Amortization of DAC
Insurance operating costs
Amortization of other intangible assets
Dividends to policyholders
Underwriting gain
Net investment income [2]
Net realized losses [2]
Other income (expense) [3]
Income before income taxes
Income tax expense [4]
Net income
[1] For additional information on current accident year catastrophes and prior accident year development, see MD&A - Critical Accounting Estimates, Property & Casualty Insurance Product Reserves, Net of Reinsurance and Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Consolidated Financial Statements.
[2] For discussion of consolidated investment results, see MD&A - Investment Results.
[3] Includes integration costs in connection with the 2019 acquisition of Navigators Group.
[4] For discussion of income taxes, see Note 16 - Income Taxes of Notes to Consolidated Financial Statements.
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Premium Measures
Small Business:
Net new business premium
Policy count retention
Renewal written price increases
Renewal earned price increases
Policies in-force as of end of period (in thousands)
Middle Market [1]:
Net new business premium
Premium retention
Renewal written price increases
Renewal earned price increases
Global Specialty:
Global specialty gross new business premium [2]
Renewal written price increases [3]
Renewal earned price increases [3]
[1] Except for net new business premium, metrics for middle market exclude loss sensitive and programs businesses.
[2] Excludes Global Re and is before ceded reinsurance.
[3] Excludes Global Re, offshore energy policies, credit and political risk insurance policies , political violence and terrorism ("PV&T") policies, and any business under which the managing agent of our Lloyd's Syndicate delegates underwriting authority to coverholders and other third parties.
Underwriting Ratios
Increase (Decrease) From 2024 to 2025
Increase (Decrease) From 2023 to 2024
Loss and loss adjustment expense ratio
Expense ratio
Policyholder dividend ratio
Combined ratio
Adjustment to reconcile combined ratio to underlying combined ratio:
Current accident year catastrophes and prior year development
Underlying combined ratio
Underlying loss and loss adjustment expense ratio
Current accident year catastrophes
Prior accident year development
Total loss and loss adjustment expense ratio
Loss and loss adjustment expense ratio
Adjustment to reconcile loss and loss adjustment expense ratio to underlying loss and loss adjustment expense ratio:
Current accident year catastrophes and prior year development
Underlying loss and loss adjustment expense ratio
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Net Income
Year ended December 31, 2025 compared to 2024
Net income increased primarily due to a higher underwriting gain and higher net investment income. For further discussion of investment results, see MD&A - Investment Results.
Underwriting Gain
Year ended December 31, 2025 compared to 2024
Underwriting gain increased due to the effect of earned premium growth, higher favorable prior accident year development, and lower CAY catastrophe losses. These favorable impacts were partially offset by a modestly higher underlying loss and LAE ratio.
Expense ratio increased slightly as higher staffing costs, including higher incentive compensation and benefits costs, higher commissions, higher technology costs and an increase in doubtful accounts were largely offset by the impact of higher earned premium.
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Earned Premiums
[1] Other earned premiums of $52, $57 and $64 for 2023, 2024 and 2025, respectively, is included in the total.
Written Premiums
[1] Other written premiums of $52, $58 and $64 for the year ended December 31, 2023, 2024 and 2025, respectively, is included in the total.
Year ended December 31, 2025 compared to 2024
Earned premiums increased due to written premium increases over the prior twelve months.
Written premiums increased driven by growth across small business, middle & large business and global specialty.
• Small business written premium increased driven by strong new business as well as renewal written price increases in almost all lines. Written premium grew across all lines of business.
• Middle & large business written premium increased driven by strong new business as well as renewal written price increases in all lines. Written premium grew across most of general industries, industry verticals and the large and complex lines.
• Global specialty written premium, excluding global reinsurance, increased driven by written price increases across most lines as well as an increase in gross new business. Written premiums grew in global reinsurance, primarily in credit risk, property, and specialty casualty.
Renewal written price increases were recognized in most lines.
• In small business, renewal written price increases were lower than prior year levels overall, with mid single-digit to low double-digit price increases across most lines. Workers' compensation pricing was flat.
• In middle market, renewal written price increases were lower than prior year levels overall, with mid single-digit to low double-digit price increases in most lines. Workers' compensation pricing was slightly positive.
• In global specialty, renewal written price increases were lower than prior year levels with mid single-digit price increases overall.
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Underlying Loss and LAE Ratio
Year ended December 31, 2025 compared to 2024
Underlying Loss and LAE ratio increased primarily due to a slightly higher loss ratio in workers' compensation and general liability, partially offset by favorable non-CAT property losses.
Catastrophes and Unfavorable (Favorable) Prior Accident Year Development
Y ear ended December 31, 2025 compared to 2024
Current accident year catastrophe losses decreased for 2025 and included losses from tornado, wind and hail events across several regions, but concentrated in the South and Midwest regions, and to a lesser extent, the Mid-Atlantic region, as well as a loss of $194 from the January 2025 California Wildfire Event.
Current accident year catastrophe losses for 2024 included losses from tornado, wind and hail events across several regions of the United States, as well as hurricanes and tropical storms primarily in the Southeast and South regions, and, to a lesser extent, winter storms mainly in the Pacific, Northeast and South regions.
Prior accident year development was net favorable for 2025 and included reserve decreases for workers' compensation, bond, catastrophes and commercial property. Also included is a benefit of $64 related to amortization of the Navigators ADC deferred gain. As of September 30, 2025 the deferred gain on the Navigators ADC has been fully amortized. For additional information regarding the ADC reinsurance agreement, refer to Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to the Consolidated Financial Statements.
Prior accident year development was net favorable for 2024 and included reserve decreases for workers' compensation, catastrophes, bond and professional liability, partially offset by reserve increases for general liability, automobile liability and assumed reinsurance. Also included is a benefit of $145 related to amortization of the Navigators ADC deferred gain.
2026 Outlook
We expect an increasingly competitive market within Business Insurance during 2026. However, we continue to expect growth in written premium and an increase in market share while generating profitable margins.
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Personal Insurance - Results of Operations
Underwriting Summary
Increase (Decrease) From 2024 to 2025
Increase (Decrease) From 2023 to 2024
Written premiums
Change in unearned premium reserve
Earned premiums
Fee income
Losses and loss adjustment expenses
Current accident year before catastrophes
Current accident year catastrophes [1]
Prior accident year development [1]
Total losses and loss adjustment expenses
Amortization of DAC
Insurance operating costs
Amortization of other intangible assets
Underwriting gain (loss)
Net investment income [2]
Net realized losses [2]
Net servicing and other income (expense) [3]
Income (loss) before income taxes
Income tax expense (benefit) [4]
Net income (loss)
[1] For discussion of current accident year catastrophes and prior accident year development, see MD&A - Critical Accounting Estimates, Property & Casualty Insurance Product Reserves, Net of Reinsurance and Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Consolidated Financial Statements.
[2] For discussion of consolidated investment results, see MD&A - Investment Results.
[3] Includes servicing revenues of $88, $85, and $81 for 2025, 2024, and 2023, respectively and includes servicing expenses of $71, $66, and $60 for 2025, 2024, and 2023, respectively.
[4] For discussion of income taxes, see Note 16 - Income Taxes of Notes to Consolidated Financial Statements.
Written and Earned Premiums
Written Premiums
Increase (Decrease) From 2024 to 2025
Increase (Decrease) From 2023 to 2024
Product Line
Automobile
Homeowners
Total
Earned Premiums
Product Line
Automobile
Homeowners
Total
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Premium Measures
Policies in-force end of period (in thousands)
Automobile
Homeowners
New business written premium
Automobile
Homeowners
Effective policy count retention
Automobile
Homeowners
Renewal written price increase
Automobile
Homeowners
Renewal earned price increase
Automobile
Homeowners
Underwriting Ratios
Increase (Decrease) From 2024 to 2025
Increase (Decrease) From 2023 to 2024
Loss and loss adjustment expense ratio
Expense Ratio
Combined Ratio
Adjustment to reconcile combined ratio to underlying combined ratio:
Current accident year catastrophes and prior year development
Underlying combined ratio
Underlying loss and loss adjustment expense ratio
Current accident year catastrophes
Prior accident year development
Total loss and loss adjustment expense ratio
Loss and loss adjustment expense ratio
Adjustment to reconcile loss and loss adjustment expense ratio to underlying loss and loss adjustment expense ratio:
Current accident year catastrophes and prior year development
Underlying loss and loss adjustment expense ratio
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Product Combined Ratios
Increase (Decrease) From 2024 to 2025
Increase (Decrease) From 2023 to 2024
Automobile
Combined ratio
Adjustment to reconcile combined ratio to underlying combined ratio:
Current accident year catastrophes
Prior accident year development
Underlying combined ratio
Homeowners
Combined ratio
Adjustment to reconcile combined ratio to underlying combined ratio:
Current accident year catastrophes
Prior accident year development
Underlying combined ratio
Net Income (Loss)
Year ended December 31, 2025 compared to 2024
Net income increased, largely driven by improved underwriting results.
Underwriting Gain (Loss)
Year ended December 31, 2025 compared to 2024
Underwriting gain increased, primarily due to the effect of an increase in earned premium due to renewal price increases and more favorable prior accident year development, partially offset by higher current accident year catastrophe losses.
Expense ratio was flat due to the effect of an increase in earned premium due to renewal written price increases, offset by an increase in technology costs, higher staffing costs including incentive compensation, and higher marketing expenses, as well as a higher commission ratio due to business mix.
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Earned Premiums
Written Premiums
Year ended December 31, 2025 compared to 2024
Earned premiums increased in 2025 primarily due to higher written premium over the prior twelve months in homeowners and earned pricing increases in automobile.
Written premiums increased in 2025 driven by the effect of written pricing increases and by an increase in new business premium in homeowners.
Renewal written pricing moderated for both automobile and homeowners, primarily in response to moderating loss cost trends.
Effective policy count retention was relatively stable for both automobile and homeowners in 2025, in response to moderating renewal written pricing increases.
Policies in-force as of the end of 2025 declined since 2024 for automobile and increased slightly for homeowners, reflecting the level of new business in relation to non-renewed policies.
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Underlying Loss and Loss Adjustment Expense Ratio
Year ended December 31, 2025 compared to 2024
Underlying loss and LAE ratio decreased in both automobile and homeowners in 2025. The decrease in automobile was primarily due to the impact of earned pricing increases, partially offset by higher loss costs. The higher loss costs in automobile were driven by higher physical damage and liability claim severities, partially offset by lower physical damage claim frequency. The automobile claim severity trend has moderated from the prior year. The automobile liability severity trend continues to recognize inflationary effects and higher attorney representation rates on bodily injury claims. For homeowners, the decrease in the underlying loss and LAE ratio was primarily due to the impact of earned pricing increases as well as lower claim frequency, partially offset by higher claim severities. Contributing to the higher homeowners severity was the effect of higher rebuilding costs.
Current Accident Year Catastrophes and Unfavorable (Favorable) Prior Accident Year Development
Year ended December 31, 2025 compared to 2024
Current accident year catastrophe losses increased in 2025 compared to the prior year. CAY catastrophe losses for 2025 included losses from tornado, wind and hail events across several regions, but concentrated in the South and Midwest regions, and to a lesser extent, in the Mountain West region, as well as a loss of $111 from the January 2025 California Wildfire Event. Current accident year catastrophe losses for 2024 included losses from tornado, wind and hail events in several regions of the United States, and to a lesser extent, from hurricanes and tropical storms primarily in the Southeast region.
Prior accident year development was favorable in 2025, primarily driven by lower estimated severity on automobile liability, homeowners, automobile physical damage, as well as decreases in reserves related to catastrophes. Prior accident year development was favorable for 2024, primarily driven by lower estimated severity on automobile physical damage, automobile liability, and homeowners, as well as decreases in reserves related to catastrophes.
2026 Outlook
In 2026, the Company expects written premium growth primarily from renewal written pricing increases in both automobile and homeowners. We expect 2026 annual written pricing increases in both automobile and homeowners to moderate compared to 2025 results, and remain in line with loss cost trends. Retention is expected to improve as written pricing moderates, while we expect the continued rollout of Prevail in the agency channel to generate growth in agency new business policies.
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Property & Casualty Other Operations - Results of Operations
Underwriting Summary
Increase (Decrease) From 2024 to 2025
Increase (Decrease) From 2023 to 2024
Losses and loss adjustment expenses
Prior accident year development [1]
Total losses and loss adjustment expenses
Insurance operating costs
Underwriting loss
Net investment income [2]
Net realized losses [2]
Other expenses
Loss before income taxes
Income tax benefit [3]
Net loss
[1] For discussion of prior accident year development, see MD&A - Critical Accounting Estimates, Property & Casualty Insurance Product Reserves, Net of Reinsurance and Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Consolidated Financial Statements.
[2] For discussion of consolidated investment results, see MD&A - Investment Results.
[3] For discussion of income taxes, see Note 16 - Income Taxes of Notes to Consolidated Financial Statements.
Net Loss
Year ended December 31, 2025 compared to 2024
Net loss decreased due to lower underwriting losses as well as lower other expenses resulting from one-time contract settlement charge on a claims servicing agreement recorded in the 2024 period.
Underwriting loss decreased due to a decrease in unfavorable prior accident year reserve development.
Unfavorable prior accident year reserve development for the year ended December 31, 2025 was primarily due to a $165 increase in A&E reserves and a $31 increase in related ULAE reserves. Unfavorable prior accident year reserve development for the year ended December 31, 2024 was primarily due to a $203 increase in A&E reserves and a $28 increase in related ULAE reserves.
Asbestos reserves prior accident year development in 2025 of $122 was primarily due to higher-than-expected frequency, an increase in claim settlement rates, and higher settlement values for a subset of accounts.
Environmental reserves prior accident year development in 2025 of $43 was primarily due to higher environmental site cleanup and monitoring costs and higher legal expenses.
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Employee Benefits - Results of Operations
Operating Summary
Increase (Decrease) From 2024 to 2025
Increase (Decrease) From 2023 to 2024
Premiums and other considerations
Net investment income [1]
Net realized losses [1]
Total revenues
Benefits, losses and loss adjustment expenses
Amortization of DAC
Insurance operating costs and other expenses
Amortization of other intangible assets
Total benefits, losses and expenses
Income before income taxes
Income tax expense [2]
Net income
[1] For discussion of consolidated investment results, see MD&A - Investment Results.
[2] For discussion of income taxes, see Note 16 - Income Taxes of Notes to Consolidated Financial Statements.
Premiums and Other Considerations
Increase (Decrease) From 2024 to 2025
Increase (Decrease) From 2023 to 2024
Fully insured — ongoing premiums
Buyout premiums
Fee income
Total premiums and other considerations
Fully insured ongoing sales
Ratios, Excluding Buyouts
Increase (Decrease) From 2024 to 2025
Increase (Decrease) From 2023 to 2024
Group disability loss ratio
Group life loss ratio
Total loss ratio
Expense ratio
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Margin
Increase (Decrease) From 2024 to 2025
Increase (Decrease) From 2023 to 2024
Net income margin
Adjustments to reconcile net income margin to core earnings margin:
Net realized losses, before tax
Integration and other non-recurring M&A costs, before tax
Income tax expense
Core earnings margin
Net Income
Year ended December 31, 2025 compared to 2024
Net income decreased primarily due to a higher group disability loss ratio, an increase in the expense ratio and higher net realized losses, partially offset by a lower group life loss ratio and higher net investment income.
Insurance operating costs and other expenses were higher due to higher staffing costs, including increased incentive compensation and benefits and higher technology costs, including increased investment.
Fully Insured Ongoing Premiums
Year ended December 31, 2025 compared to 2024
Fully insured ongoing premiums was up slightly as an increase in exposure on existing accounts was largely offset by lower fully insured ongoing sales during the past year.
Fully insured ongoing sales decreased compared to prior year driven by lower sales of the paid family and medical leave product and fewer large case sales.
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Ratios
Year ended December 31, 2025 compared to 2024
Loss ratio improved 0.2 points in 2025 compared to the prior year period. The group life loss ratio decreased 2.4 points driven by lower mortality across both term and accidental life products. The group disability loss ratio increased 1.6 points due to higher short-term and long-term disability loss trends as well as the prior year update to the long-term disability claim recovery rate reserve assumptions, which reduced the prior year loss ratio by 0.5 points, partially offset by paid family and medical leave product pricing actions.
Expense ratio increased primarily due to higher staffing costs, including increased incentive compensation and benefits and higher technology costs, including increased investment.
2026 Outlook
The Company expects growth in fully insured ongoing premiums in 2026 due to sales and continued strong book persistency. The level of long-term disability incidence and recoveries will impact the group disability loss ratio. The 2025 group life loss ratio benefited from favorable mortality which is not expected to repeat in 2026. We expect the long-term net income margin outlook for this business to be approximately 6% to 7%.
Hartford Funds - Results of Operations
Operating Summary
Increase (Decrease) From 2024 to 2025
Increase (Decrease) From 2023 to 2024
Fee income and other revenue
Net investment income
Net realized gains
Total revenues
Operating costs and other expenses
Income before income taxes
Income tax expense [1]
Net income
Daily average Hartford Funds AUM
ROA [2]
Adjustments to reconcile ROA to ROA, core earnings:
Effect of net realized losses (gains), excluded from core earnings, before tax
Effect of income tax expense (benefit)
ROA, core earnings [2]
[1] For discussion of income taxes, see Note 16 - Income Taxes of Notes to Consolidated Financial Statements.
[2] Represents annualized earnings divided by a daily average of assets under management, as measured in basis points.
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Hartford Funds Segment AUM
Increase (Decrease) From 2024 to 2025
Increase (Decrease) From 2023 to 2024
Mutual Fund and ETF AUM - beginning of period
Sales - Mutual Fund
Redemptions - Mutual Fund
Net flows - ETF
Net Flows - Mutual Fund and ETF
Change in market value and other
Mutual Fund and ETF AUM - end of period
Third-party life and annuity separate account AUM
Hartford Funds AUM - end of period
Mutual Fund and ETF AUM by Asset Class
Increase (Decrease) From 2024 to 2025
Increase (Decrease) From 2023 to 2024
Equity - Mutual Funds
Fixed Income - Mutual Funds
Multi-Strategy Investments - Mutual Funds [1]
Equity - ETF
Fixed Income - ETF
Mutual Fund and ETF AUM
[1] Includes balanced, allocation, and alternative investment products.
Net Income
Year ended December 31, 2025 compared to 2024
Net income increased for the year ended December 31, 2025 , primarily due to an increase in fee income net of operating costs and other expenses driven by higher daily average AUM.
Hartford Funds AUM
December 31, 2025 compared to 2024
Hartford Funds AUM increased primarily due to an increase in equity market levels, partially offset by net outflows over the preceding twelve month period. Net outflows were $3.7 billion for the year ended December 31, 2025 compared to net outflows of $3.2 billion for the year ended December 31, 2024.
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2026 Outlook
Assuming continued growth in equity markets in 2026, the Company expects net income for Hartford Funds to increase from 2025 to 2026.
Corporate - Results of Operations
Operating Summary
Increase (Decrease) From 2024 to 2025
Increase (Decrease) From 2023 to 2024
Fee income [1]
Net investment income [2]
Net realized gains [2]
Other revenue (loss)
Total revenues
Benefits, losses and loss adjustment expenses [3]
Insurance operating costs and other expenses [1]
Interest expense [4]
Restructuring and other costs
Total benefits, losses and expenses
Loss before income taxes
Income tax benefit [5]
Net loss
Preferred stock dividends
Net loss available to common stockholders
[1] Includes investment management fees and expenses related to managing third-party assets.
[2] For discussion of consolidated investment results, see MD&A - Investment Results.
[3] Includes benefits expense on life and annuity business previously underwritten by the Company.
[4] For discussion of debt, see Note 13 - Debt of Notes to Consolidated Financial Statements.
[5] For discussion of income taxes, see Note 16 - Income Taxes of Notes to Consolidated Financial Statements.
Net loss available to common stockholders
Year ended December 31, 2025 compared to 2024
Net loss available to common stockholders for the year ended December 31, 2025 decreased driven by a higher net tax benefit, which includes a higher charitable stock donation benefit as well as the release of a provision for an uncertain tax position and tax related interest accruals, and an increase in other revenues related to valuation appreciation of an investment, partially offset by lower net realized gains and net investment income. For further discussion of income taxes, see Note 16 - Income Taxes of Notes to Consolidated Financial Statements.
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Enterprise Risk Management
The Company’s Board of Directors has ultimate responsibility for risk oversight, as described more fully in our Proxy Statement, while management is tasked with the day-to-day management of the Company’s risks.
The Company manages and monitors risk through risk policies, controls and limits. At the senior management level, an Enterprise Risk and Capital Committee oversees the risk profile and risk management practices of the Company. As illustrated below, a number of functional committees sit underneath the ERCC, providing oversight of specific risk areas and recommending risk mitigation strategies to the ERCC.
ERCC Members
CEO (Chair)
Chief Financial Officer
Chief Investment Officer
Chief Risk Officer
Chief Underwriting Officer
General Counsel
Others as deemed necessary by the Committee Chair
ERCC
Asset Liability Committee
Underwriting Risk Committee
Emerging Risk Steering Committee
Operational Risk Committee
Economic Capital Executive Committee
Model Oversight Committee
Executive Artificial Intelligence Governance Council
The Company's enterprise risk management ("ERM") function supports the ERCC and functional committees, and is tasked with, among other things:
• risk identification and assessment;
• the development of risk appetites, tolerances, and limits;
• risk monitoring; and
• internal and external risk reporting.
The Company categorizes its main risks as insurance risk, operational risk and financial risk, each of which is described in more detail below.
Insurance Risk
Insurance risk is the risk of losses of both a catastrophic and non-catastrophic nature on the P&C and Employee Benefits products the Company has sold. Catastrophe insurance risk is the exposure arising from both natural catastrophes (e.g., weather, earthquakes, wildfires, pandemics) and man-made catastrophes (e.g., terrorism, cyber-attacks) that create a concentration or aggregation of loss across the Company's insurance or asset portfolios.
Sources of Insurance Risk Non-catastrophe insurance risks exist within each of the Company's segments except Hartford Funds and include:
• Property- Risk of loss to personal or commercial property from automobile related accidents, weather, explosions, smoke, shaking, fire, theft, vandalism, inadequate installation, faulty equipment, collisions and falling objects, and/or machinery mechanical breakdown resulting in physical damage, losses from PV&T and other covered perils.
• Liability- Risk of loss from automobile related accidents, uninsured and under-insured drivers, lawsuits from accidents, defective products, breach of warranty, negligent acts by professional practitioners, environmental claims, latent exposures, fraud, coercion, forgery, failure to fulfill obligations per contract surety, liability from errors and omissions, losses from CPRI coverages, losses from derivative lawsuits, and other securities actions and covered perils.
• Mortality- Risk of loss from unexpected trends in insured deaths impacting timing of payouts from group life insurance, personal or commercial automobile related accidents, and death of employees or executives during the course of employment, while on disability, or while collecting workers compensation benefits.
• Morbidity- Risk of loss to an insured from illness incurred during the course of employment or illness from other covered perils.
• Disability- Risk of loss incurred from personal or commercial automobile related losses, accidents arising outside of the workplace, injuries or accidents incurred
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during the course of employment, or from equipment, with each loss resulting in short-term or long-term disability payments.
• Longevity- Risk of loss from increased life expectancy trends among policyholders receiving long-term benefit payments.
• Cyber Insurance - Risk of loss to property, breach of data and business interruption from various types of cyber-attacks.
Catastrophe risk primarily arises in the property, automobile, workers' compensation, casualty, group life, and group disability lines of business but could also arise from other coverages such as losses under PV&T and CPRI policies. See the term Current Accident Year Catastrophe Ratio within the Key Performance Measures and Ratios section of MD&A for an explanation of how the Company defines catastrophe losses in its financial reporting.
Impact Non-catastrophe insurance risk can arise from unexpected loss experience, underpriced business and/or underestimation of loss reserves and can have significant effects on the Company’s earnings. Catastrophe insurance risk can arise from various unpredictable events and can have significant effects on the Company's earnings and may result in losses that could constrain its liquidity.
Management The Company's policies and procedures for managing these risks include disciplined underwriting protocols, exposure controls, sophisticated risk-based pricing, risk modeling, risk transfer, and capital management strategies. The Company has established underwriting guidelines for both individual risks, including individual policy limits, and risks in the
aggregate, including aggregate exposure limits by geographic zone and peril. The Company uses both internal and third-party models to estimate the potential loss resulting from various catastrophe events and the potential financial impact those events would have on the Company's financial position and results of operations across its businesses.
The Hartford closely monitors scientific literature on climate change to help identify climate change risks impacting our business. We use data from the scientific community and other outside experts including partnerships with third-party catastrophe modeling firms to inform our risk management activities and stay abreast of potential implications of climate-related impacts that we incorporate into our risk assessment. We regularly study these climate change implications and incorporate these risks into our catastrophe risk assessment and management strategy through product pricing, underwriting and management of aggregate risk to manage implications of severe weather and climate change in our insurance portfolio.
In addition, certain insurance products offered by The Hartford provide coverage for losses incurred due to cyber events and the Company has assessed and modeled how those products would respond to different events in order to manage its aggregate exposure to losses incurred under the insurance policies we sell. The Company models numerous deterministic scenarios including losses caused by malware, data breach, distributed denial of service attacks, intrusions of cloud environments and attacks of power grids.
Among specific risk tolerances set by the Company, risk limits are set for natural catastrophes, terrorism risk and pandemic risk.
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Risk
Definition
Details and Company Limits
Natural catastrophe
Exposure arising from natural phenomena (e.g., earthquakes, wildfires, etc.) that create a concentration or aggregation of loss across the Company's insurance or asset portfolios and the inherent volatility of weather or climate pattern changes.
The Company generally limits its estimated before tax loss as a result of natural catastrophes for property & casualty exposures from a single 250-year event to less than 30% of the reported capital and surplus of the property and casualty insurance subsidiaries prior to reinsurance and to less than 15% of the reported capital and surplus of the property and casualty insurance subsidiaries after reinsurance. The Company generally limits its estimated before tax loss from an aggregation of multiple natural catastrophe events for an all-peril annual aggregate 100-year event to less than 18% reported capital and surplus of the property and casualty insurance subsidiaries after reinsurance. From time to time the estimated loss from natural catastrophes may fluctuate above or below these limits due to changes in modeled loss estimates, exposures or statutory surplus. [1]
The table below represents the estimated before tax catastrophe loss exceedance probabilities, from an aggregate of all catastrophe events occurring in a one-year timeframe before and after reinsurance and from a single hurricane or earthquake occurrence.
Modeled Loss Gross and Net of Reinsurance [2]
Probability of Loss Exceedance [3]
Gross of Reinsurance
Net of Reinsurance
Aggregate annual all-peril (1-in-100) (1.0%)
Aggregate annual all-peril (1-in-250) (0.4%)
Hurricane single occurrence (1-in-100) (1.0%)
Hurricane single occurrence (1-in-250) (0.4%)
Earthquake single occurrence (1-in-100) (1.0%)
Earthquake single occurrence (1-in-250) (0.4%)
Terrorism
The risk of losses from terrorist attacks, including losses caused by single-site and multi-site conventional attacks, as well as the potential for attacks using nuclear, biological, chemical or radiological weapons (“NBCR”).
Enterprise limits for terrorism apply to aggregations of risk across property & casualty, employee benefits and specific asset portfolios and are defined based on a deterministic, single-site conventional terrorism attack scenario. The Company manages its potential estimated loss from a conventional terrorism loss scenario, up to $2.0 billion net of reinsurance and $2.5 billion gross of reinsurance, before coverage under TRIPRA. In addition, the Company monitors exposures monthly and employs both internally developed and vendor-licensed loss modeling tools as part of its risk management discipline. Our modeled exposures to conventional terrorist attacks around landmark locations may fluctuate above and below our stated limits.
Pandemic
The exposure to loss arising from widespread influenza or other pathogens or bacterial infections that create an aggregation of loss across the Company's insurance or asset portfolios.
The Company generally limits its estimated before tax loss from a single 250 year pandemic event to less than 18% of the aggregate reported capital and surplus of the property and casualty and employee benefits insurance subsidiaries. In evaluating these scenarios, the Company assesses the impact on group life, short-term disability, long-term disability and property & casualty claims. While ERM has a process to track and manage these limits, from time to time, the estimated loss for pandemics may fluctuate above or below these limits due to changes in modeled loss estimates, exposures, or statutory surplus. In addition, the Company assesses losses in the investment portfolio associated with market declines in the event of a widespread pandemic. [1]
[1] For U.S. insurance subsidiaries, reported capital and surplus is equal to actual U.S. statutory capital and surplus. For Navigators insurers in non-U.S. jurisdictions, reported capital and surplus is equal to U.S. GAAP equity of those subsidiaries less certain assets such as goodwill and other intangible assets.
[2] The loss estimates represent total property modeled losses for hurricane single occurrence events, property and workers' compensation modeled losses for earthquake single occurrence events, and modeled aggregate annual losses for natural catastrophes from all perils (hurricane, flood, earthquake, hail, tornado, wildfire and winter storms). The net loss estimates provided assume that the Company is able to recover all losses ceded to reinsurers under its reinsurance programs. The Company also manages natural catastrophe risk for group life and group disability, which in combination with property and workers compensation loss estimates are subject to separate enterprise risk management net aggregate loss limits as a percent of enterprise surplus.
[3] The modeled probability of loss exceedance represents the likelihood of a loss from single peril occurrence or from an aggregate of catastrophe events from all perils to exceed the indicated amount in a one-year time frame.
Reinsurance as a Risk Management Strategy
The Company uses reinsurance to transfer certain risks to reinsurance companies based on specific geographic or risk concentrations. A variety of traditional reinsurance products are used as part of the Company's risk management strategy, including excess of loss occurrence-based products that reinsure property and workers' compensation exposures, and individual risk (including facultative reinsurance) or quota share arrangements, that reinsure losses from specific classes or lines of business. The Company has no significant finite risk contracts in place and the statutory surplus benefit from all such prior year
contracts is immaterial. The Hartford also participates in governmentally administered reinsurance facilities such as the Florida Hurricane Catastrophe Fund (“FHCF”), the TRIPRA and other reinsurance programs relating to particular risks or specific lines of business.
Reinsurance for Catastrophes - The Company utilizes various reinsurance programs to mitigate catastrophe losses including excess of loss occurrence-based treaties covering property and workers’ compensation, a catastrophe bond, an aggregate property catastrophe treaty, and individual risk agreements (including facultative reinsurance) that reinsure losses from
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specific classes or lines of business. The aggregate property catastrophe treaty covers the aggregate losses of catastrophe events (up to $350 per event) designated by the Property Claim Services office of Verisk and, for international business, net losses arising from two or more risks involved in the same loss occurrence totaling at least $500 thousand, in excess of a $750 retention. The occurrence-based property catastrophe treaty responds in excess of $200 per occurrence for all perils other than earthquakes and named hurricanes and tropical storms.
For earthquakes and named tropical storms the occurrence based property treaty responds in excess of $350 per occurrence. The occurrence property catastrophe treaty and workers’ compensation catastrophe treaties beginning with the January 1, 2021 renewal do not cover pandemic losses, as most industry reinsurance programs exclude communicable disease. The Company has reinsurance in place to cover individual group life losses in excess of $1.25 per person.
Primary Catastrophe Reinsurance Coverages as of January 1, 2026 [1]
Portion of losses reinsured
Portion of losses retained by The Hartford
Per Occurrence Property Catastrophe Treaty from 1/1/2026 to 12/31/2026 [1] [2]
Losses of $0 to $200
None
100% retained
Losses of $200 to $350 for earthquakes and named hurricanes and tropical storms [3]
None
100% retained
Losses of $200 to $350 from one event other than earthquakes and named hurricanes and tropical storms [3]
40% of $150 in excess of $200
60% co-participation
Losses of $350 to $500 from one event (all perils)
75% of $150 in excess of $350
25% co-participation
Losses of $500 to $1.30 billion from one event [4] (all perils)
90% of $800 in excess of $500
10% co-participation
Per Occurrence Property Catastrophe Bonds from 1/1/2026 to 12/31/2026 [5]
Losses of $1.29 billion to $1.62 billion for tropical cyclone and earthquake events [6]
60.79% of $329 in excess of $1.29 billion
39.21% of $329 in excess of $1.29 billion
Losses of $1.60 billion to $1.90 billion for tropical cyclone and earthquake events [6]
90% of $300 in excess of $1.60 billion
10% of $300 in excess of $1.60 billion
Aggregate Property Catastrophe Treaty for 1/1/2026 to 12/31/2026 [7]
$0 to $750 of aggregate losses
None
100% Retained
$750 to $950 of aggregate losses
None
Workers' Compensation Catastrophe Treaty for 1/1/2026 to 12/31/2026
Losses of $0 to $100 from one event
None
100% Retained
Losses of $100 to $450 from one event [8]
80% of $350 in excess of $100
20% co-participation
[1] These agreements do not cover the assumed reinsurance business which purchases its own retrocessional coverage.
[2] In addition to the Per Occurrence Property Catastrophe Treaty, for Florida homeowners wind events, The Hartford has purchased the mandatory FHCF reinsurance for the annual period starting June 1, 2025. Retention and coverage varies by writing company. For the 2025 - 2026 period, the writing company with the largest coverage under FHCF is Hartford Insurance Company of the Midwest, with coverage of $37 in per event losses in excess of a $23 retention (estimates are based on best available information at this time and are periodically updated as information is made available by Florida).
[3] Named hurricanes and tropical storms are defined as any storm or storm system declared to be a hurricane or tropical storm by the US National Hurricane Center, US Weather Prediction Center, or their successor organizations (being divisions of the US National Weather Service).
[4] Portions of this layer of coverage extend beyond a traditional one year term.
[5] Refer to "Catastrophe Bonds" discussion below for further information.
[6] Tropical cyclones are defined as a storm or storm system that has been declared by National Weather Service or any division or agency thereof (including the National Hurricane Center or the Weather Prediction Center) or any of their successors to be a hurricane, tropical storm, or tropical depression.
[7] The aggregate treaty is not limited to a single event; rather, it is designed to provide reinsurance protection for the aggregate of all catastrophe events (up to $350 per event), either designated by the Property Claim Services office of Verisk or, for international business, net losses arising from two or more risks involved in the same loss occurrence totaling at least $500 thousand. All catastrophe losses, except assumed reinsurance business losses, apply toward satisfying the $750 attachment point under the aggregate treaty.
[8] In addition to the limits shown, the workers' compensation reinsurance includes a non-catastrophe, industrial accident layer, providing coverage for 80% of $25 in per event losses in excess of a $25 retention.
In addition to the property catastrophe reinsurance coverage described in the above table, the Company has other reinsurance agreements that cover property catastrophe losses, some of which provide for reinstatement of limits in the event of loss with reinstatement provisions varying depending on the layer of coverage. The Per Occurrence Property Catastrophe Treaty and Workers' Compensation Catastrophe Treaty include a provision to reinstate one limit in the event that a catastrophe loss exhausts limits on one or more layers under the treaties.
Catastrophe Bonds - The Company has property catastrophe protection in the form of catastrophe bonds issued through indemnity agreements with Foundation Re IV Ltd. (“Foundation Re IV”), an independent Bermuda company registered as a special purpose insurer under the Bermuda Insurance Act of 1978 and related rules and regulations. The agreements provide fully collateralized loss coverage on the Company’s commercial and personal property and automobile physical damage in all 50 states of the United States of America, the District of Columbia and Puerto Rico from tropical cyclone and earthquake events.
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The Company has two reinsurance agreements with Foundation Re IV. The first agreement, which originally incepted January 1, 2024, provides indemnity per occurrence excess of loss coverage of 60.79% of $329 in excess of $1.29 billion for the treaty term effective January 1, 2026 through December 31, 2026. The second agreement incepted January 1, 2026 and provides indemnity per occurrence excess of loss coverage of 90% of $300 in excess of $1.6 billion for the treaty term effective January 1, 2026, through December 31, 2029. The attachment point and maximum limit under these agreements are reset annually to adjust the expected loss of the layer within a predetermined range. The Company has not incurred any losses that have resulted in or are expected to result in a recovery under the reinsurance agreements with Foundation Re IV since their inception.
Under the terms of the reinsurance agreements, the Company is obligated to pay annual reinsurance premiums to Foundation Re IV for the reinsurance coverage. Amounts payable to the Company under the reinsurance agreements with respect to any covered event cannot exceed the Company's actual losses from such event. The principal amount of the catastrophe bonds will be reduced by any amounts paid to the Company under the reinsurance agreements.
The reinsurance agreements meet the requirements to be accounted for as reinsurance in accordance with the guidance for reinsurance contracts. In connection with the reinsurance agreements, Foundation Re IV issued $200 and $270, respectively, in notes (generally referred to as “catastrophe bonds”) to investors in amounts equal to the full coverage provided under the reinsurance agreements. The proceeds of the issuances were deposited in a reinsurance trust account.
As with any reinsurance agreement, there is credit risk associated with collecting amounts due from reinsurers. Foundation Re IV’s credit risk is mitigated by a reinsurance trust account that has been funded by Foundation Re IV with money market funds that invest solely in direct government obligations and obligations backed by the U.S. government. The money market funds must have the highest principal stability ratings from S&P Global Ratings (“S&P”) or Moody’s Investors Service, Inc. (“Moody’s”) on the issuance date of the bonds and thereafter must be rated by S&P or Moody’s, as applicable. Other permissible investments include money market funds which invest in repurchase and reverse repurchase agreements collateralized by direct government obligations and obligations of any agency backed by the U.S. government with terms of no more than 397 calendar days, and cash.
At the time the agreements were entered into with Foundation Re IV, the Company evaluated the applicability of the accounting guidance that addresses variable interest entities (“VIEs”) and concluded that it was a VIE. However, while Foundation Re IV was determined to be a VIE, the Company concluded that it did not have a variable interest in the entity, as the variability in its results, caused by the reinsurance agreements, are expected to be absorbed entirely by the investors in the catastrophe bonds issued by Foundation Re IV and residual amounts earned by it, if any, are expected to be absorbed by the equity investor (the Company has neither an equity nor a residual interest in Foundation Re IV).
Accordingly, the Company is not the primary beneficiary of Foundation Re IV and does not consolidate that entity in the
Company’s Consolidated Financial Statements. Additionally, because the Company has no intention to pursue any transaction that would result in it acquiring interest in and becoming the primary beneficiary of Foundation Re IV, the consolidation of that entity in the Company’s Consolidated Financial Statements in future periods is unlikely.
Reinsurance for Terrorism- For the risk of terrorism, private sector catastrophe reinsurance capacity is generally limited and largely unavailable for terrorism losses caused by nuclear, biological, chemical or radiological attacks. As such, the Company's principal reinsurance protection against large-scale terrorist attacks is the coverage currently provided through TRIPRA to the end of 2027.
TRIPRA provides a backstop for insurance-related losses resulting from any “act of terrorism”, which is certified by the Secretary of the Treasury, in consultation with the Secretary of Homeland Security and the Attorney General, for losses that exceed a threshold of industry losses of $200. Under the program, in any one calendar year, the federal government will pay a percentage of losses incurred from a certified act of terrorism after an insurer's losses exceed 20% of the Company's eligible direct commercial earned premiums of the prior calendar year up to a combined annual aggregate limit for the federal government and all insurers of $100 billion. The federal government pays 80% of the losses. The Company's estimated deductible under the program is $2.4 billion for 2026. If an act of terrorism or acts of terrorism result in covered losses exceeding the $100 billion annual industry aggregate limit, Congress would be responsible for determining how additional losses in excess of $100 billion will be paid.
Reinsurance for A&E and Navigators Group Reserve Development - The Company has two ADC reinsurance agreements in place, both of which are accounted for as retroactive reinsurance. One agreement covered substantially all A&E reserve development for 2016 and prior accident years (the “A&E ADC”) up to an aggregate limit of $1.5 billion and the other covered substantially all reserve development of Navigators Insurance Company ("NIC") and certain of its affiliates for 2018 and prior accident years (the “Navigators ADC”) up to an aggregate limit of $300. As the Company has ceded all of the $300 and $1.5 billion available limits under the Navigators ADC and the A&E ADC; respectively, there is no remaining limit available under either agreement as of December 31, 2025. As of December 31, 2025, the Company has paid A&E ADC claims in excess of the $1.7 billion attachment point. The Company will amortize the deferred gain into income as recoveries are received. During 2024 and 2025, the Company collected recoveries from NICO under the Navigators ADC and as a result amortized $145 and $64 of the $209 deferred gain within benefits, losses and loss adjustment expenses in the Consolidated Statements of Operations, respectively. As of December 31, 2025, the deferred on the Navigators ADC has been fully amortized and the limit fully collected. As of December 31, 2024, the deferred on the Navigators ADC was $64, and is included in other liabilities on the Consolidated Balance Sheets. For more information on the A&E ADC and the Navigators ADC, see Note 1, Basis of Presentation and Significant Accounting Policies, and Note 10, Reserve for and Adjustment Expenses of Notes to Consolidated Financial Statements.
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Reinsurance Recoverables
Property and Casualty insurance product reinsurance recoverables represent loss and loss adjustment expense recoverables from a number of entities, including reinsurers and pools. A portion of the total gross reinsurance recoverables balance relates to the Company’s participation in various mandatory (assigned) and involuntary risk pools and the value of annuity contracts held under structured settlement agreements.
Employee Benefits and Corporate reinsurance recoverables represent reserves for future policy benefits and unpaid loss and loss adjustment expenses and other policyholder funds and benefits payable that are recoverable from a number of reinsurers.
The table below shows the gross and net reinsurance recoverables reported in the Property and Casualty and Employee Benefits reportable segments as well as Corporate.
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. 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. For further discussion on reinsurance recoverables, including details of recoverables by AM Best credit rating, see Note 8 – Reinsurance of Notes to Consolidated Financial Statements.
Annually, the Company completes evaluations of the reinsurance recoverable asset associated with older, long-term casualty liabilities reported in the Property & Casualty Other Operations reportable segment and the allowance for uncollectible reinsurance reported in the Business Insurance and Employee Benefits reportable segments as well as the Corporate category. For a discussion regarding the results of the evaluation of older, long-term casualty liabilities reported in the Property & Casualty Other Operations reportable segment, see MD&A - Critical Accounting Estimates, Property & Casualty Insurance Product Reserves, Net of Reinsurance. For a discussion of the allowance for uncollectible reinsurance, see Note 8 – Reinsurance of Notes to Consolidated Financial Statements.
Reinsurance Recoverables as of December 31,
Property and Casualty
Employee Benefits
Corporate
Total
Paid loss and loss adjustment expenses
Unpaid loss and loss adjustment expenses
Gross reinsurance recoverables
Allowance for uncollectible reinsurance
Net reinsurance recoverables
Guaranty Funds and Other Insurance-related Assessments
As part of its risk management strategy, the Company regularly monitors the financial strength of other insurers and, in particular, activity by insurance regulators and various state guaranty associations in the U.S. relating to troubled insurers. In all states, insurers licensed to transact certain classes of insurance are required to become members of a guaranty fund.
Operational Risk
Operational risk is the risk of loss resulting from inadequate or failed internal processes and systems, human error, or from external events.
Sources of Operational Risk Operational risk is inherent in the Company's business and functional areas. Operational risks include: compliance with laws and regulations, cybersecurity, business disruption, technology failure, inadequate execution or process management, reliance on model and data analytics, internal fraud, external fraud, third party dependency and attraction and retention of talent.
Impact Operational risk can result in financial loss, disruption of our business, regulatory actions or damage to our reputation.
Management Responsibility for day-to-day management of operational risk lies within each business unit and functional area. ERM provides an enterprise-wide view of the Company's operational risk on an aggregate basis. ERM is responsible for establishing, maintaining and communicating the framework, principles and guidelines of the Company's operational risk management program. Operational risk mitigation strategies include the following:
• Establishing policies and monitoring risk tolerances and exceptions;
• Conducting business risk assessments and implementing action plans where necessary;
• Validating existing crisis management protocols;
• Identifying and monitoring emerging operational risks; and
• Purchasing insurance coverage.
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Cybersecurity Risk
For information on the prevention, detection, mitigation and remediation of cybersecurity incidents, see Part I, Item 1C – Cybersecurity.
Financial Risk
Financial risks include direct and indirect risks to the Company's financial objectives from events that impact financial market conditions and the value of financial assets. Some events may cause correlated movement in multiple risk factors. The primary sources of financial risks are the Company's invested assets.
Consistent with its risk appetite, the Company establishes financial risk limits to control potential loss on a U.S. GAAP, statutory, and economic basis. Exposures are actively monitored and managed, with risks mitigated where appropriate. The Company uses various risk management strategies, including limiting aggregation of risk, portfolio re-balancing and hedging with OTC and exchange-traded derivatives with counterparties meeting the appropriate regulatory and due diligence requirements. Derivatives may be used to achieve the following Company-approved objectives: (1) hedging risk arising from interest rate, equity market, credit spread and issuer default, price or currency exchange rate risk or volatility; (2) managing liquidity; (3) controlling transaction costs; and (4) engaging in income generation covered call transactions and synthetic replication transactions. Derivative activities are monitored and evaluated by the Company’s compliance and risk management teams and reviewed by senior management. The Company identifies different categories of financial risk, including liquidity, credit, interest rate, equity, and foreign currency exchange.
Liquidity Risk
Liquidity risk is the risk to current or prospective earnings or capital arising from the Company's inability or perceived inability to meet its contractual funding obligations as they come due.
Sources of Liquidity Risk Sources of liquidity risk include funding risk, company-specific liquidity risk and market liquidity risk resulting from differences in the amount and timing of sources and uses of cash as well as company-specific and general market conditions. Stressed market conditions may impact the ability to sell assets or otherwise transact business and may result in a significant loss in value of the investment portfolio.
Impact Inadequate capital resources and liquidity could negatively affect the Company’s overall financial strength and its ability to generate cash flows from its businesses, borrow funds at competitive rates, and raise new capital to meet operating and growth needs.
Management The Company has defined ongoing monitoring and reporting requirements to assess liquidity across the enterprise under both current and stressed market conditions. The Company measures and manages liquidity risk exposures and funding needs within prescribed limits across legal entities, taking into account legal, regulatory and operational limitations to the transferability of liquid assets among legal entities. The Company also monitors internal and external conditions, and identifies material risk changes and
emerging risks that may impact operating cash flows or liquid assets. The liquidity requirements of The Hartford Insurance Group, Inc. ("HIG Holding Company") have been and will continue to be met by the HIG Holding Company's fixed maturities, short-term investments and cash, and dividends from its subsidiaries, principally from its insurance operations, as well as the issuance of common stock, debt or other capital securities and borrowings from its credit facilities as needed. The Company maintains multiple sources of contingent liquidity including a revolving credit facility, an intercompany liquidity agreement that allows for short-term advances of funds among the HIG Holding Company and certain affiliates, and access to collateralized advances from the Federal Home Loan Bank of Boston ("FHLBB") for certain affiliates. The Company's CFO has primary responsibility for liquidity risk.
Credit Risk and Counterparty Risk
Credit risk is the risk to earnings or capital due to uncertainty of an obligor’s or counterparty’s ability or willingness to meet its obligations in accordance with contractually agreed upon terms. Credit risk is comprised of three major factors: the risk of change in credit quality, or credit migration risk; the risk of default; and the risk of a change in value due to changes in credit spreads.
Sources of Credit Risk The majority of the Company’s credit risk is concentrated in its investment holdings and use of derivatives, but it is also present in the Company’s ceded reinsurance activities, bond insurance, and certain aspects of Business Insurance products.
Impact A decline in creditworthiness is typically reflected as an increase in an investment’s credit spread and an associated decline in the investment's fair value, potentially resulting in recording an ACL and an increased probability of a realized loss upon sale. In certain instances, counterparties may default on their obligations and the Company may realize a loss on default. Premiums receivable, including premiums for retrospectively rated plans, reinsurance recoverable and deductible losses recoverable are also subject to credit risk based on the counterparty’s inability to pay.
Management The objective of the Company’s enterprise credit risk management strategy is to identify, quantify, and manage credit risk in aggregate and to limit potential losses in accordance with the Company's credit risk management policy. The Company manages its credit risk by managing aggregations of risk, holding a diversified mix of issuers and counterparties across its investment, reinsurance, and insurance portfolios, and limiting exposure to any specific reinsurer or counterparty. Potential credit losses can be mitigated through diversification (e.g., geographic regions, asset types, industry sectors), hedging and the use of collateral to reduce net credit exposure.
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The Company manages credit risk through the use of various surveillance, analyses and governance processes. The investment and reinsurance areas have formal policies and procedures for counterparty approvals and authorizations, which establish criteria defining minimum levels of creditworthiness and financial stability for eligible counterparties. Potential investments are subject to underwriting reviews and management approval. Mitigation strategies vary across the three sources of credit risk, but may include:
• Investing in a portfolio of high-quality and diverse securities;
• Selling investments subject to heightened credit risk;
• Hedging through use of credit default swaps;
• Clearing derivative transactions through central clearing houses that require daily variation margin;
• Entering into derivative and reinsurance contracts only with strong creditworthy institutions;
• Requiring collateral; and
• Non-renewing policies/contracts or reinsurance treaties.
The Company has developed credit exposure thresholds which are based upon counterparty ratings. Aggregate counterparty credit quality and exposure are monitored on a daily basis utilizing an enterprise-wide credit exposure information system that contains data on issuers, ratings, exposures, and credit limits. Exposures are tracked on a current and potential basis and aggregated by ultimate parent of the counterparty across investments, reinsurance receivables, insurance products with credit risk, and derivatives.
As of December 31, 2025, the Company had no investment exposure to any credit concentration risk of a single issuer or counterparty greater than 10% of the Company's stockholders' equity, other than the U.S. government and certain U.S. government agencies. For further discussion of concentration of credit risk in the investment portfolio, see the Concentration of Credit Risk section in Note 5 - Investments of Notes to Consolidated Financial Statements.
Assets and Liabilities Subject to Credit Risk
Investments Essentially all of the Company's invested assets are subject to credit risk. In 2025, there were net credit losses on fixed maturities, AFS of $0 and a net credit loss on mortgage loans of $6. In 2024, there were net credit losses on fixed maturities, AFS of $2 and a net credit loss reversal on mortgage loans of $3. Refer to the Investment Portfolio Risk section of Financial Risk Management under “Credit Losses on Fixed Maturities, AFS and Intent-to-Sell Impairments" and "ACL on Mortgage Loans”.
Reinsurance recoverables Reinsurance recoverables, net of an allowance for uncollectible reinsurance, were $7,191 and $7,140 as of December 31, 2025 and 2024 respectively. Refer to the Enterprise Risk Management section of the MD&A under “Reinsurance as a Risk Management Strategy”.
Bond insurance The Company collects premiums and holds reserves for risk exposures within the bond insurance business where the Company guarantees the completion of our insured's financial or performance obligations in the event of a default on their contractual obligations. The Company manages this risk through underwriting risk assessment, collateral requirements for insureds, claims management, and reinsurance.
Premiums receivable and agents' balances Premiums receivable and agents’ balances, net of an ACL, were $6,316 and $5,998, as of December 31, 2025 and 2024, respectively. For a discussion regarding collectibility of these balances, see Note 7 - Premiums Receivable and Agents' Balances of Notes to Consolidated Financial Statements.
Credit Risk of Derivatives
The Company uses various derivative counterparties in executing its derivative transactions. The use of counterparties creates credit risk that the counterparty may not perform in accordance with the terms of the derivative transaction.
Downgrades to the credit ratings of the Company’s insurance operating companies may have adverse implications for its use of derivatives. In some cases, downgrades may give derivative counterparties for OTC derivatives and clearing brokers for OTC-cleared derivatives the right to cancel and settle outstanding derivative trades or require additional collateral to be posted. In addition, downgrades may result in counterparties and clearing brokers becoming unwilling to engage in or clear additional derivatives or may require additional collateralization before entering into any new trades.
Managing the Credit Risk of Counterparties to Derivative Instruments
The Company also has derivative counterparty exposure policies which limit the Company’s exposure to credit risk. The Company monitors counterparty exposure on a monthly basis to ensure compliance with Company policies and statutory limitations. The Company’s policies with respect to derivative counterparty exposure establishes market-based credit limits,
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favors long-term financial stability and creditworthiness of the counterparty and typically requires credit enhancement/credit risk reducing agreements, which are monitored and evaluated by the Company’s risk management team and reviewed by senior management.
The Company minimizes the credit risk of derivative instruments by entering into transactions with high quality counterparties primarily rated A or better. The Company also generally requires that OTC derivative contracts be governed by an International Swaps and Derivatives Association ("ISDA") Master Agreement, which is structured by legal entity and by counterparty and permits right of offset. The Company enters into credit support annexes in conjunction with the ISDA agreements, which require daily collateral settlement based upon agreed upon thresholds.
The Company’s credit exposures are generally quantified based on the prior business day’s net fair value, including income accruals, of all derivative positions transacted with a single counterparty for each separate legal entity. The notional amount of derivative contracts represents the basis upon which pay or receive amounts are calculated and are not necessarily reflective of credit risk. The Company enters into collateral arrangements in connection with its derivatives positions and collateral is pledged to or held by, or on behalf of, the Company to the extent the exposure is greater than zero, subject to minimum transfer thresholds, if applicable. In accordance with industry standards and the contractual requirements, collateral is typically settled on the same business day. For further discussion, see the Derivative Commitments section of Note 14 - Commitments and Contingencies of Notes to Consolidated Financial Statements.
Use of Credit Derivatives
The Company may also use credit default swaps to manage credit exposure or to assume credit risk to enhance yield.
Credit Risk Reduced Through Credit Derivatives
The Company may use credit derivatives to purchase credit protection with respect to a single entity or referenced index. The Company may purchase credit protection through credit default swaps to economically hedge and manage credit risk of certain fixed maturity investments across multiple sectors of the investment portfolio. As of December 31, 2025 and 2024 the Company did not hold credit derivatives that purchase credit protection.
Credit Risk Assumed Through Credit Derivatives
The Company may also enter into credit default swaps that assume credit risk as part of replication transactions. Replication transactions may be used as an economical means to synthetically replicate the characteristics and performance of assets that are permissible investments under the Company’s investment policies. As of December 31, 2025 and 2024, the Company did not hold credit default swaps that assume credit risk.
For further information on credit derivatives, see Note 6 - Derivatives of Notes to Consolidated Financial Statements.
Credit Risk of Business Operations
A portion of the Company's Business Insurance business is written with large deductibles or under retrospectively-rated plans. 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. For more information, see Note 7- Premiums Receivable and Agents' Balances of Notes to Consolidated Financial Statements.
Interest Rate Risk
Interest rate risk is the risk of financial loss due to adverse changes in the value of assets and liabilities arising from movements in interest rates. Interest rate risk encompasses exposures with respect to changes in the level of interest rates, the shape of the term structure of rates and the volatility of interest rates. Interest rate risk does not include exposure to changes in credit spreads.
Sources of Interest Rate Risk The Company has exposure to interest rate risk arising from investments in fixed maturities and commercial mortgage loans, issuances by the Company of debt securities, preferred stock and similar securities, discount rate assumptions associated with the Company’s claim reserves and pension and other postretirement benefit obligations, and assets that support the Company's pension plans.
Impact Changes in interest rates from current levels can have both favorable and unfavorable effects for the Company.
Change in Interest Rates
Favorable Effects
Unfavorable Effects
• Additional net investment income due to reinvesting at higher yields and higher yields on variable rate securities
• Decrease in the fair value of the fixed income investment portfolio
• Increase in the fair value of the fixed income investment portfolio
• Lower net investment income due to reinvesting at lower yields and lower yields on variable rate securities
• Acceleration in paydowns and prepayments or calls of certain mortgage-backed and municipal securities
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Management The Company primarily manages its exposure to interest rate risk by constructing investment portfolios that seek to protect the Company from the economic impact associated with changes in interest rates by setting portfolio duration targets that are aligned with the duration of the liabilities that they support. The Company analyzes interest rate risk using various models including parametric models and cash flow simulation under various market scenarios of the liabilities and their supporting investment portfolios. Key metrics that the Company uses to quantify its exposure to interest rate risk inherent in its invested assets and the associated liabilities include duration, convexity and key rate duration.
The Company may also use interest rate swaps and, to a lesser extent, futures to mitigate interest rate risk associated with its investment portfolio or liabilities and to manage portfolio duration. Interest rate swaps are primarily used to convert interest receipts or payments to a fixed or variable rate. The use of such swaps enables the Company to customize contract terms and conditions to desired objectives and manage the duration profile within established tolerances. As of December 31, 2025 and 2024, notional amounts pertaining to derivatives utilized to manage interest rate risk, including offsetting positions, totaled $4.1 billion and $4.6 billion, respectively, and primarily relate to hedging invested assets. As of December 31, 2025 and 2024, the fair value of these derivatives was $(3) and $0, respectively.
Assets and Liabilities Subject to Interest Rate Risk
Fixed income investments The fair value of fixed income investments, which include fixed maturities, commercial mortgage loans, and short-term investments, was $57.4 billion and $53.3 billion at December 31, 2025 and 2024, respectively. The weighted average duration of the portfolio, including derivative instruments, was approximately 3.9 years and 3.8 years as of December 31, 2025 and 2024, respectively. Changes in the fair value of fixed maturities due to changes in interest rates are reflected as a component of AOCI.
Long-term debt obligations The Company's variable rate debt obligations will generally result in increased interest expense as a result of higher interest rates; the inverse is true during a declining interest rate environment. However, as explained in Note 13 - Debt of Notes to Consolidated Financial Statements, the Company has entered into an interest-rate swap agreement to effectively convert variable interest rate payments on its $500 junior subordinated debentures due 2067 to fixed interest payments. Changes in the value of fixed rate long-term debt as a result of changes in interest rates will impact the fair value of these instruments but not the carrying value in the Company's Consolidated Balance Sheets.
Group life and disability product liabilities The cash outflows associated with contracts issued by the Company's Employee Benefits segment, primarily group life and short and long-term disability policy liabilities, are not interest rate sensitive but vary based on timing. Though the aggregate cash flow payment streams are relatively predictable, these products rely upon actuarial pricing assumptions (including mortality and morbidity) and have an element of cash flow uncertainty. As of December 31, 2025 and 2024, the Company had $8,404 and $8,496, respectively of reserves for group life and disability contracts. For most Employee Benefits liabilities, changes in interest rates will impact the fair value but not the carrying value in the Company's Consolidated Balance Sheets. For long-duration insurance contracts, including paid-up life and life conversions, changes in interest rates will impact both the fair value and the carrying value in the Company's Consolidated Balance Sheets.
Pension and other postretirement benefit obligations The Company’s pension and other postretirement benefit obligations are exposed to interest rate risk based upon the sensitivity of present value obligations to changes in liability discount rates and for the pension plan the sensitivity of the fair value of investments in the plan portfolios to changes in interest rates. The discount rate assumption is based upon an interest rate yield curve that reflects high-quality fixed income investments consistent with the maturity profile of the expected liability cash flows. The Company is exposed to the risk of having to make additional pension plan contributions if the plan's investment returns, including from investments in fixed maturities, are lower than expected. As there were no remaining assets in the other postretirement plan as of December 31, 2025, the Company will fund from Company assets going forward. For further discussion of discounting pension and other postretirement benefit obligations, refer to Note 18 - Employee Benefit Plans of Notes to Consolidated Financial Statements.
Interest Rate Sensitivity
Group Life and Disability Reserves and Invested Assets Supporting Them
Included in the following table is the before tax change in the net economic value of contracts issued by the Company’s Employee Benefits segment, primarily group life and disability, for which fixed valuation discount rate assumptions are established based upon investment returns assumed in pricing, along with the corresponding invested assets. For long-duration insurance contracts the discount rate is updated quarterly with
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an equivalent single rate that is based on a current market observable, upper-medium grade fixed maturity yield. This has been interpreted to represent a yield based on single-A credit rated fixed maturity instruments with similar duration to the related liability. Also included in this analysis are the interest rate sensitive derivatives used by the Company to hedge its exposure to interest rate risk in the investment portfolios supporting these contracts. This analysis does not include the assets and corresponding liabilities of other insurance products such as automobile, property, workers' compensation and general liability insurance. Certain financial instruments, such as limited partnerships and other alternative investments, have been omitted from the analysis as the interest rate sensitivity of these investments is generally lower and less predictable than fixed income investments. The calculation of the estimated hypothetical change in net economic value below assumes a 100 basis point upward and downward parallel shift in the yield curve.
The selection of the 100 basis point parallel shift in the yield curve was made only as an illustration of the potential impact of such an event and should not be construed as a prediction of future market events. Actual results could differ materially from those illustrated below due to the nature of the estimates and assumptions used in the analysis. The Company’s sensitivity analysis calculation assumes that the composition of invested assets and liabilities remain materially consistent throughout the year and that the current relationship between short-term and long-term interest rates will remain constant over time. As a result, these calculations may not fully capture the impact of portfolio re-allocations, significant product sales or non-parallel changes in interest rates.
Interest Rate Sensitivity of Employee Benefits Reserves and Invested Assets Supporting Them
Change in Net Economic Value as of December 31,
Basis point shift
Increase (decrease) in economic value, before tax
The carrying value of assets related to supporting Employee Benefits, primarily long-term disability reserves, was $10.1 billion and $10.0 billion, as of December 31, 2025 and 2024, respectively, and included fixed maturities, commercial mortgage loans and short-term investments. The assets are monitored and managed within set duration guidelines and are evaluated on a daily basis, as well as annually, using scenario simulation techniques in compliance with regulatory requirements.
Invested Assets not Supporting Group Life and Disability Reserves
The following table provides an analysis showing the estimated before tax change in the fair value of the Company’s investments and related derivatives, excluding assets supporting group life and disability reserves which are included in the table above, assuming 100 basis point upward and downward parallel shifts in the yield curve as of December 31, 2025 and 2024. Certain financial instruments, such as limited partnerships and other alternative investments, have been
omitted from the analysis as the interest rate sensitivity of these investments is generally lower and less predictable than fixed income investments.
Interest Rate Sensitivity of Invested Assets (Excluding Those Supporting Employee Benefits Reserves)
Change in Fair Value as of December 31,
Basis point shift
Increase (decrease) in fair value, before tax
The carrying value of fixed maturities, commercial mortgage loans and short-term investments, excluding those related to supporting Employee Benefits short and long-term disability reserves, was $47.3 billion and $43.3 billion as of December 31, 2025 and 2024, respectively.
Long-term Debt
A 100 basis point parallel decrease in the yield curve would result in an increase in the fair value of long-term debt by $393 and $397 as of December 31, 2025 and 2024, respectively. A 100 basis point parallel increase in the yield curve would result in a decrease in the fair value of long-term debt by $335 and $336 as of December 31, 2025 and 2024, respectively. Changes in the value of long-term debt as a result of changes in interest rates will not impact the carrying value in the Company's Consolidated Balance Sheets.
Pension and Other Postretirement Plan Obligations
A 100 basis point parallel decrease in the yield curve would impact both the value of the underlying pension assets and the value of the liabilities, resulting in an increase in the unfunded liabilities (or decrease in asset) for pension and other postretirement plan obligations of $11 and $9 as of December 31, 2025 and 2024, respectively. A 100 basis point parallel increase in the yield curve would have the inverse effect and result in a decrease in the unfunded liabilities (or increase in assets) for pension and other postretirement plan obligations of $(2) and $3 as of December 31, 2025 and 2024, respectively. Gains or losses due to changes in the yield curve on the pension and postretirement plan obligations are recorded within AOCI and are amortized into the actuarial loss component of net periodic benefit cost when they exceed a threshold.
Equity Risk
Equity risk is the risk of financial loss due to changes in the value of global equities or equity indices.
Sources of Equity Risk The Company has exposure to equity risk from invested assets, assets that support the
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Company’s pension plans, and fee income derived from Hartford Funds AUM.
Impact The investment portfolio is exposed to losses from market declines affecting equity securities and derivatives, which could negatively impact the Company's reported earnings. In addition, investments in limited partnerships and other alternative investments generally have a level of correlation to domestic equity market levels and can expose the Company to losses in earnings if valuations decline; however, earnings impacts are recognized on a lag as results from private equity investments and other funds are generally reported on a three-month delay. For assets supporting pension plans, the Company may be required to make additional plan contributions if equity investments in the plan portfolios decline in value. Hartford Funds earnings are also significantly influenced by the U.S. and other equity markets. Generally, declines in equity markets will reduce the value of average daily AUM and the amount of fee income generated from those assets. Increases in equity markets will generally have the inverse impact.
Management The Company uses various approaches in managing its equity exposure, including limits on the proportion of assets invested in equities, diversification of the equity portfolio, and, at times, hedging of changes in equity indices. For assets supporting pension plans, the asset allocation mix is reviewed on a periodic basis. In order to minimize risk, the pension plans maintain a listing of permissible and prohibited investments and impose concentration limits and investment quality requirements on permissible investment options.
Assets and Liabilities Subject to Equity Risk
Investment portfolio The investment portfolio is exposed to losses from market declines affecting equity securities and derivatives, as well as limited partnerships and other alternative investments. Generally, declines in equity markets will reduce the value of these types of investments and could negatively impact the Company’s earnings while increases in equity will have the inverse impact. For equity securities, the changes in fair value are reported in net realized gains and losses. For limited partnerships and other alternative investments, the Company's share of earnings for the period is recorded in net investment income, though typically on a delay based on the availability of the underlying financial statements. For a discussion of equity sensitivity, see below.
Assets supporting pension plans The Company may be required to make additional plan contributions if equity investments in the plan portfolios decline in value. For a discussion of equity sensitivity, see below.
Declines in value are recognized as unrealized losses in AOCI. Increases in equity markets are recognized as unrealized gains in AOCI. Unrealized gains and losses in AOCI are amortized into the actuarial loss component of net periodic benefit cost when they exceed a threshold. For further discussion of equity risk associated with the pension plans, see Note 18 - Employee Benefit Plans of Notes to Consolidated Financial Statements.
Assets under management AUM in Hartford Funds may decrease in value during equity market declines, which would result in lower earnings because fee income is earned based upon the value of AUM.
Equity Sensitivity
Investment portfolio and the assets supporting pension plans
Included in the following tables are the estimated before tax change in the economic value of the Company’s invested assets and assets supporting pension plans with sensitivity to equity risk. The calculation of the hypothetical change in economic value below assumes a 20% upward and downward shock to the Standard & Poor's 500 Composite Price Index ("S&P 500"). For limited partnerships and other alternative investments, the movement in economic value is calculated using a beta analysis largely derived from historical experience relative to the S&P 500.
The selection of the 20% shock to the S&P 500 was made only as an illustration of the potential impact of such an event and should not be construed as a prediction of future market events. Actual results could differ materially from those illustrated below due to the nature of the estimates and assumptions used in the analysis. These calculations do not capture the impact of portfolio re-allocations.
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Equity Sensitivity
As of December 31, 2025
As of December 31, 2024
Shock to S&P 500
Shock to S&P 500
(Before tax)
Fair Value
Fair Value
Investment Portfolio
Assets supporting pension plans
Hartford Funds assets under management
Hartford Funds earnings are significantly influenced by the U.S. and other equity markets. If equity markets were to hypothetically decline 20% and remain depressed for one year, the estimated before tax impact on reported Hartford Funds earnings for that one year period is approximately $70 as of December 31, 2025. The selection of the 20% shock to the S&P 500 was made only as an illustration of the potential impact of such an event and should not be construed as a prediction of future market events. Actual results could differ materially due to the nature of the estimates and assumptions used in the analysis.
Foreign Currency Exchange Risk
Foreign currency exchange risk is the risk of financial loss due to changes in the relative value between currencies.
Sources of Currency Risk The Company has foreign currency exchange risk in non-U.S. dollar denominated cash, fixed maturities, and derivative instruments. In addition, the Company has non-U.S. subsidiaries, some with functional currencies other than U.S. dollar, and which transact business in multiple currencies resulting in assets and liabilities denominated in foreign currencies.
Impact Changes in relative values between currencies can create variability in cash flows and realized or unrealized gains and losses on changes in the fair value of assets and liabilities. The impact on the fair value of fixed maturities, AFS due to changes in foreign currency exchange rates, in relation to functional currency, is reported in unrealized gains or losses as part of other comprehensive income ("OCI"). The realization of gains or losses resulting from investment sales or from changes in investments that record changes in fair value through the income statement due to changes in foreign currency exchange rates is reflected through net realized gains and losses.
In regard to insurance and reinsurance contracts that the Company enters into for which we are obligated to pay losses in a foreign currency, the impact of changes in foreign currency exchange rates on assets and liabilities related to these contracts is reflected through net realized gains and losses. These assets or liabilities include, but are not limited to, cash and cash equivalents, premiums receivable, reinsurance recoverables, and unpaid losses and loss adjustment expenses. Additionally, the Company translates the assets, liabilities, and income of non-U.S. dollar functional currency legal entities into
U.S. dollars. This translation amount is reported as a component of other comprehensive income.
Management The Company manages its foreign currency exchange risk primarily through asset-liability matching and through the use of derivative instruments. However, legal entity capital is invested in local currencies in order to satisfy regulatory requirements and to support local insurance operations. The foreign currency exposure of non-U.S. dollar denominated investments will most commonly be reduced through the sale of the assets or through hedges using foreign currency swaps and forwards.
Assets and Liabilities Subject to Foreign Currency Exchange Risk
Investment portfolio The Company is exposed to foreign exchange risk affecting non-U.S. dollar denominated cash, fixed maturities, and derivative instruments. Changes in relative values between currencies can positively or negatively impact net realized gains and losses or unrealized gains (losses) as part of other comprehensive income.
Insurance contract related assets and liabilities The Company has non-U.S. dollar denominated insurance and reinsurance contracts and associated premiums receivable, reinsurance recoverables and unpaid losses and loss adjustment expenses, that are exposed to foreign exchange risk. For contracts that are within U.S dollar functional currency legal entities, changes in foreign currency exchange rates can positively or negatively impact net realized gains and losses. For contracts within non-U.S. dollar functional currency legal entities, changes in the functional currency relative to the U.S. dollar can positively or negatively impact other comprehensive income.
Foreign Currency Sensitivity
For the Company’s primary currencies that create foreign exchange risk, the following table provides the estimated impact of a hypothetical 10% unfavorable change in exchange rates. Actual results could differ materially due to the nature of the estimates and assumptions used in the analysis. The amounts presented are in U.S. dollars and before tax.
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Foreign Currency Sensitivity [1]
GBP
CAD
10% Unfavorable Change
December 31, 2025
Net assets (liabilities)
December 31, 2024
Net assets (liabilities)
[1] Table excludes currencies where the value of net assets in U.S. dollar equivalent is less than 1% of total net assets of the Company.
Financial Risk on U.S. Statutory Capital
U.S. Statutory surplus amounts and RBC ratios may increase or decrease in any period depending upon a variety of factors and may be compounded in extreme scenarios or if multiple factors occur at the same time. At times, the impact of changes in certain market factors or a combination of multiple factors on RBC ratios can be counterintuitive. Factors include:
• A decrease in the value of certain fixed-income and equity securities in our investment portfolio, due in part to credit spreads widening, an increase in interest rates, or a decline in equity market levels, may result in a decrease in statutory surplus and RBC ratios;
• A decline in investment yields may reduce our net investment income, which may result in a decrease in statutory surplus and RBC ratios;
• Decreases in the value of certain derivative instruments that do not get hedge accounting, may reduce statutory surplus and RBC ratios; and
• Non-market factors can also impact the amount and volatility of either our actual or potential obligation, as well as the related statutory surplus and RBC ratios.
Most of these factors are outside of the Company’s control. Among other factors, rating agencies consider the level of statutory capital and surplus of our U.S. insurance subsidiaries as well as the level of U.S. GAAP capital held by the Company in determining the Company’s financial strength and credit ratings. Rating agencies may implement changes to their internal models that have the effect of increasing or decreasing the amount of capital we must hold in order to maintain our current ratings.
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Investment Portfolio Risk
The credit ratings referenced throughout this section are based on availability and are generally the midpoint of the available ratings among Moody’s, S&P, and Fitch. If no rating is available from a rating agency, then an internally developed rating is
used. Accrued investment income related to fixed maturities is not included in the amortized cost or fair value of the fixed maturities. For further information refer to Note 5 - Investments of Notes to Consolidated Financial Statements.
Fixed Maturities, AFS by Type
December 31, 2025
December 31, 2024
Amortized Cost
ACL
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
Percent of Total Fair Value
Amortized Cost
ACL
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
Percent of Total Fair Value
ABS
Consumer loans
Other
CLOs
CMBS
Agency [1]
Bonds
Interest only
Corporate
Basic industry
Capital goods
Consumer cyclical
Consumer non-cyclical
Energy
Financial services
Tech./comm.
Transportation
Utilities
Real estate investment trusts ("REITs")
Foreign govt./govt. agencies
Municipal bonds
Taxable
Tax-exempt
RMBS
Agency
Non-agency
U.S. Treasuries
Total fixed maturities, AFS
FVO securities
[1] Includes securities with pools of loans issued by the Small Business Administration which are backed by the full faith and credit of the U.S. government.
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Fixed Maturities, AFS by Credit Quality
December 31, 2025
December 31, 2024
Amortized Cost
Fair Value
Percent of Total Fair Value
Amortized Cost
Fair Value
Percent of Total Fair Value
United States Government/Government agencies
AAA
BBB
BB & below
Total fixed maturities, AFS [1]
[1] Excludes FVO securities. For further discussion on FVO securities, see Note 4 - Fair Value Measurements of Notes to Consolidated Financial Statements.
The fair value of fixed maturities, AFS increased as compared to December 31, 2024, primarily due to net additions of corporate bonds, high-quality RMBS and ABS, partially offset by net reductions to tax-exempt municipal bonds.The increase was also due to higher valuations as a result of lower interest rates.
Commercial & Residential Real Estate
The following tables present the Company’s exposure to CMBS and RMBS by credit quality included in the preceding Fixed Maturities, AFS by Type table.
Exposure to CMBS and RMBS as of December 31, 2025
AAA
BBB
BB and Below
Total
Amortized Cost
Fair Value
Amortized Cost
Fair Value
Amortized Cost
Fair Value
Amortized Cost
Fair Value
Amortized Cost
Fair Value
Amortized Cost
Fair Value
CMBS
Agency [1]
Bonds
Interest Only
Total CMBS
RMBS
Agency
Non-Agency
Total RMBS
Total CMBS & RMBS
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Exposure to CMBS and RMBS as of December 31, 2024
AAA
BBB
BB and Below
Total
Amortized Cost
Fair Value
Amortized Cost
Fair Value
Amortized Cost
Fair Value
Amortized Cost
Fair Value
Amortized Cost
Fair Value
Amortized Cost
Fair Value
CMBS
Agency [1]
Bonds
Interest Only
Total CMBS
RMBS
Agency
Non-Agency
Total RMBS
Total CMBS & RMBS
[1] Includes securities with pools of loans issued by the Small Business Administration which are backed by the full faith and credit of the U.S. government.
The Company also has exposure to commercial mortgage loans. These loans are collateralized by real estate properties that are diversified both geographically throughout the United States and by property type. These commercial mortgage loans are originated by the Company as high quality whole loans, and the Company may sell participation interests in one or more loans to third parties. A loan participation interest represents a pro-rata share in interest and principal payments generated by the participated loan, and the relationship between the Company as loan originator, lead participant and servicer and the third party as a participant are governed by a participation agreement.
As of December 31, 2025, mortgage loans had an amortized cost of $6.9 billion and carrying value of $6.8 billion, with an ACL of $49. As of December 31, 2024, mortgage loans had an amortized cost of $6.4 billion and carrying value of $6.4 billion, with an ACL of $44.
The Company funded $1.3 billion of commercial mortgage loans, primarily industrial properties, with a weighted average loan-to-value (“LTV”) ratio of 57% and a weighted average yield of 6.2% during the twelve months ended December 31, 2025. The Company continues to originate commercial mortgage loans on institutional-quality properties with strong LTV ratios. There were no mortgage loans held for sale as of December 31, 2025 or December 31, 2024.
Municipal Bonds
The following table presents the Company’s exposure to municipal bonds by type and weighted average credit quality included in the preceding Securities by Type table.
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Available For Sale Investments in Municipal Bonds
December 31, 2025
December 31, 2024
Amortized Cost
Fair Value
Weighted Average Credit Quality
Amortized Cost
Fair Value
Weighted Average Credit Quality
General Obligation
Pre-refunded [1]
Revenue
Transportation
Health Care
Leasing [2]
Education
Water & Sewer
Sales Tax
Housing
Power
Other
Total Revenue
Total Municipal
[1] Pre-refunded bonds are bonds for which an irrevocable trust containing sufficient U.S. treasury, agency, or other securities has been established to fund the remaining payments of principal and interest.
[2] Leasing revenue bonds are generally the obligations of a financing authority established by the municipality that leases facilities back to a municipality. The notes are typically secured by lease payments made by the municipality that is leasing the facilities financed by the issue. Lease payments may be subject to annual appropriation by the municipality or the municipality may be obligated to appropriate general tax revenues to make lease payments.
As of December 31, 2025, the largest issuer concentrations were the Metropolitan Transportation Authority, CommonSpirit Health, and the State of California, which each comprised less than 4% of the municipal bond portfolio and were primarily comprised of general obligation and revenue bonds. As of December 31, 2024, the largest issuer concentrations were the State of Illinois, the State of California, and the Metropolitan Transportation Authority, which each comprised less than 3% of the municipal bond portfolio and were primarily comprised of general obligation and revenue bonds. In total, municipal bonds make up 7% of the fair value of the Company's investment portfolio.
Limited Partnerships and Other Alternative Investments
The following table presents the Company’s investments in limited partnerships and other alternative investments which include real estate joint ventures, real estate funds, private equity funds, other funds, and other alternative investments. Private equity funds primarily consist of investments in funds whose assets typically consist of a diversified pool of investments in small to mid-sized non-public businesses with high growth potential and strong owner sponsorship, as well as limited exposure to public markets.
Income or losses on investments in limited partnerships and other alternative investments are recognized on a lag as results from private equity investments and other funds are generally reported on a three-month delay.
Limited Partnerships and Other Alternative Investments - Net Investment Income
Year Ended December 31,
Amount
Yield [1]
Amount
Yield [1]
Amount
Yield [1]
Real estate joint ventures and funds
Private equity funds
Other funds
Other alternative investments [2]
Total
[1] Yields calculated using annualized net investment income divided by the monthly average invested assets.
[2] Consists of an insurer-owned life insurance policy which is primarily invested in private equity funds and fixed income.
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Investments in Limited Partnerships and Other Alternative Investments
December 31, 2025
December 31, 2024
Amount
Percent
Amount
Percent
Real estate joint ventures and funds
Private equity funds
Other funds
Other alternative investments [1]
Total
[1] Consists of an insurer-owned life insurance policy which is primarily invested in private equity funds and fixed income.
Fixed Maturities, AFS — Unrealized Loss Aging
The total gross unrealized losses were $1.4 billion as of December 31, 2025, and have decreased $803 since December 31, 2024, primarily due to lower interest rates. As of December 31, 2025, $1.1 billion of the gross unrealized losses were associated with fixed maturities, AFS depressed less than 20% of amortized cost. The remaining $0.3 billion of gross unrealized losses were associated with fixed maturities, AFS depressed greater than 20%. The fixed maturities, AFS depressed more than 20% primarily related to corporate fixed maturities, U.S. Treasuries, and municipal bonds, that are mainly depressed because current interest rates are higher than at the respective purchase dates.
As part of the Company’s ongoing investment monitoring process, the Company has reviewed its fixed maturities, AFS in an unrealized loss position and concluded that these fixed maturities are temporarily depressed and are expected to recover in value as the investments approach maturity or as market spreads tighten. For these fixed maturities in an unrealized loss position where an ACL has not been recorded, the Company’s best estimate of expected future cash flows are sufficient to recover the amortized cost basis of the investment. Furthermore, the Company neither has an intention to sell nor does it expect to be required to sell these investments. For further information regarding the Company’s ACL analysis, see the Credit Losses on Fixed Maturities, AFS and Intent-to-Sell Impairments section below.
Unrealized Loss Aging for Fixed Maturities, AFS
December 31, 2025
December 31, 2024
Consecutive Months
Items
Amortized Cost
ACL
Unrealized Loss
Fair Value
Items
Amortized Cost
ACL
Unrealized Loss
Fair Value
Three months or less
Greater than three to six months
Greater than six to nine months
Greater than nine to eleven months
Twelve months or more
Total
Unrealized Loss Aging for Fixed Maturities, AFS Continuously Depressed Over 20%
December 31, 2025
December 31, 2024
Consecutive Months
Items
Amortized Cost
ACL
Unrealized Loss
Fair Value
Items
Amortized Cost
ACL
Unrealized Loss
Fair Value
Three months or less
Greater than three to six months
Greater than six to nine months
Greater than nine to eleven months
Twelve months or more
Total
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Credit Losses on Fixed Maturities, AFS and Intent-to-Sell Impairments
For the year ended December 31, 2025
The Company recorded no net change in the ACL. There were no unrealized losses on securities with an ACL recognized in OCI. For further information, refer to Note 5 - Investments of Notes to Consolidated Financial Statements.
There were no intent-to-sell impairments.
The Company incorporates its best estimate of future performance using internal assumptions and judgments that are informed by economic and industry specific trends, as well as our expectations with respect to security specific developments.
Future intent-to-sell impairments or credit losses may develop as the result of changes in our intent to sell specific securities that are in an unrealized loss position or if modeling assumptions, such as macroeconomic factors or security specific developments, change unfavorably from our current modeling assumptions, resulting in lower cash flow expectations.
For the year ended December 31, 2024
The Company recorded net credit losses of $2, primarily attributable to increases in the ACL of $1 on CMBS and $1 on a below investment grade corporate issuer. Unrealized losses on securities with an ACL recognized in other comprehensive income were less than $1.
There were no intent-to-sell impairments.
ACL on Mortgage Loans
For the year ended December 31, 2025
The Company reviews mortgage loans on a quarterly basis to estimate the ACL with changes in the ACL recorded in net realized gains and losses. Apart from an ACL recorded on individual mortgage loans where the borrower is experiencing financial difficulties, the Company records an ACL on the pool of mortgage loans based on lifetime expected credit losses. For further information, refer to Note 5 - Investments of Notes to Consolidated Financial Statements.
The Company recorded an increase in the ACL on mortgage loans of $6 primarily attributable to weaker real estate fundamentals, property specific declines, and net additions of new loans.
For the year ended December 31, 2024
The Company recorded a credit loss reversal of $3 primarily attributable to improved economic scenario forecasts and property specific improvements, partially offset by net additions of new loans.
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Capital Resources and Liquidity
The following section discusses the overall financial strength of The Hartford and its insurance operations including their ability to generate cash flows from each of their business segments, borrow funds at competitive rates and raise new capital to meet operating and growth needs.
Summary of Capital Resources and Liquidity
Capital available to the holding company as of December 31, 2025:
• Approximately $1.5 billion in fixed maturities, short-term investments, investment sales receivable and cash at the HIG Holding Company;
• A senior unsecured revolving credit facility that provides for borrowing capacity up to $750 of unsecured credit through September 24, 2030. As of December 31, 2025, there were no borrowings outstanding; and
• An intercompany liquidity agreement that allows for short-term advances of funds among the HIG Holding Company and certain affiliates of up to $2.0 billion for liquidity and other general corporate purposes. As of December 31, 2025, $1.85 billion was available, $150 was outstanding between certain affiliates, and there were no amounts outstanding at the HIG Holding Company. As of February 19, 2026, $1.86 billion was available, $145 was outstanding between certain affiliates and there were no amounts outstanding at the HIG Holding Company.
2026 expected dividends and other sources of capital:
The future payment of dividends from our subsidiaries is dependent on several factors including business results, capital position and liquidity of our subsidiaries.
• P&C - The Company's property and casualty insurance subsidiaries have regulatory dividend capacity of $2.5 billion for 2026. The HIG Holding Company expects to receive approximately $2.2 billion of net dividends in 2026 after considering state deposit and regulatory capital requirements to support growth in certain entities, dividends that are expected to be subsequently contributed to P&C subsidiaries and dividends related to interest on intercompany notes.
• Employee Benefits - Hartford Life and Accident Insurance Company ("HLA") has regulatory dividend capacity of $589 in 2026 with approximately $580 of dividends expected in 2026.
• Hartford Funds - HIG Holding Company expects to receive approximately $170 in dividends from Hartford Funds in 2026.
Expected liquidity requirements for the next twelve months as of December 31, 2025:
• $194 of interest on debt, net of settlements on a related interest rate swap. See Note 13 - Debt of Notes to Consolidated Financial Statements;
• $21 dividends on preferred stock, subject to the discretion of the Board of Directors; and
• $670 of common stockholders' dividends, subject to the discretion of the Board of Directors and before share repurchases.
Expected liquidity requirements for beyond the next twelve months as of December 31, 2025:
• Interest on and repayments of debt, see Note 13 - Debt of Notes to Consolidated Financial Statements.
• Preferred stock and common stock dividends, subject to the discretion of the Board of Directors.
Equity repurchase program:
In 2025, the Company repurchased 12.9 million common shares for $1.6 billion under the $3.3 billion share repurchase program authorized by the Board of Directors, effective through December 31, 2026. As of December 31, 2025, the Company has $1.55 billion remaining for equity repurchases under the share repurchase program effective through 2026. During the period January 1, 2026 through February 19, 2026, the Company repurchased approximately 1.8 million common shares for $247.
The timing of any repurchases is dependent on several factors, including the market price of the Company's securities, the Company's capital position, consideration of the effect of any repurchases on the Company's financial strength or credit ratings, the Company's blackout periods, and other considerations.
Liquidity Requirements and Sources of Capital
The Hartford Insurance Group, Inc. ("HIG Holding Company")
The liquidity requirements of the HIG Holding Company will primarily be met by HIG Holding Company’s fixed maturities; short-term investments and cash; and dividends from its subsidiaries, principally its insurance operations . The Company maintains sufficient liquidity and has a variety of contingent liquidity resources to manage liquidity across a range of economic scenarios.
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The HIG Holding Company expects to continue to receive dividends from its operating subsidiaries in the future and manages capital in its operating subsidiaries to be sufficient under significant economic stress scenarios. Dividends from subsidiaries and other sources of funds at the holding company may be used to repurchase shares under the authorized share repurchase program at the discretion of management.
Under significant economic stress scenarios, the Company has the ability to meet short-term cash requirements, if needed, by borrowing under its revolving credit facility or by having its insurance subsidiaries take collateralized advances under a facility with the FHLBB. The Company could also choose to have its insurance subsidiaries sell certain highly liquid, high quality fixed maturities or the Company could issue debt in the public markets under its shelf registration.
Dividends
The Hartford's Board of Directors declared the following quarterly dividends since October 1, 2025:
Common Stock Dividends
Declared
Record
Payable
Amount per share
October 27, 2025
December 1, 2025
January 5, 2026
February 18, 2026
March 2, 2026
April 2, 2026
Preferred Stock Dividends
Declared
Record
Payable
Amount per share
December 17, 2025
February 2, 2026
February 17, 2026
February 18, 2026
May 1, 2026
May 15, 2026
There are no current restrictions on HIG Holding Company's ability to pay dividends to its stockholders.
For a discussion of restrictions on dividends to HIG Holding Company from its insurance subsidiaries, see the following "Dividends from Subsidiaries" discussion. For a discussion of potential restrictions on the HIG Holding Company's ability to pay dividends, see Part I, Item 1A, — Risk Factors for the risk factor "Our ability to declare and pay dividends is subject to limitations."
Dividends from Subsidiaries
Dividends to HIG Holding Company from its insurance subsidiaries are restricted by insurance regulation. The Company’s principal insurance subsidiaries are domiciled in the United States and the United Kingdom.
The payment of dividends by Connecticut-domiciled insurers is limited under the insurance holding company laws of Connecticut. These laws require notice to and approval by the state insurance commissioner for the declaration or payment of any dividend, which, together with other dividends or distributions made within the preceding twelve months, exceeds the greater of (i) 10% of the insurer’s statutory policyholder surplus as of December 31 of the preceding year or (ii) net
income (or net gain from operations, if such company is a life insurance company) for the preceding year, in each case determined under statutory insurance accounting principles. In addition, if any dividend of a Connecticut-domiciled insurer exceeds the insurer’s earned surplus, it requires the prior approval of the Connecticut Insurance Commissioner.
Property casualty insurers domiciled in New York, including NIC and Navigators Specialty Insurance Company ("NSIC"), generally may not, without notice to and approval by the state insurance commissioner, pay dividends out of earned surplus in any twelve‑month period that exceeds the lesser of (i) 10% of the insurer’s statutory policyholders’ surplus as of the most recent financial statement on file, or (ii) 100% of its adjusted net investment income, as defined, for the same twelve month period.
The insurance holding company laws of the other jurisdictions in which The Hartford’s insurance subsidiaries are incorporated (or deemed commercially domiciled) generally contain similar (although in certain instances more restrictive) limitations on the payment of dividends. In addition to statutory limitations on paying dividends, the Company also takes other items into consideration when determining dividends from subsidiaries. These considerations include, but are not limited to, expected earnings and capitalization, regulatory capital requirements, liquidity requirements and state deposit requirements of the individual subsidiary.
Corporate members of Lloyd's syndicates may pay dividends to its parent to the extent of available profits that have been distributed from the syndicate in excess of the FAL capital requirement and subject to restrictions imposed under UK Company Law. The FAL is determined based on the syndicate's SCR under the Solvency II capital adequacy model, the current regulatory framework governing UK domiciled insurers, plus a Lloyd’s specific economic capital assessment.
Insurers domiciled in the United Kingdom may pay dividends to their parent out of their statutory profits subject to restrictions imposed under U.K. Company law and Solvency II.
In 2025, HIG Holding Company received $592 of dividends from HLA and $161 from Hartford Funds, and $43 from other non-insurance subsidiaries. In addition, HIG Holding Company received $1.7 billion of net dividends from P&C subsidiaries in 2025 which excludes $75 of P&C dividends that were subsequently contributed to P&C subsidiaries and $107 of P&C dividends related to interest payments on an intercompany note owed by Hartford Holdings, Inc. ("HHI") to Hartford Fire Insurance Company. Refer to "2026 expected dividends and other sources of capital" for expected payments of dividends from our subsidiaries in 2026.
Other Sources of Capital for the HIG Holding Company
The Hartford endeavors to maintain a capital structure that provides financial and operational flexibility to its insurance subsidiaries, ratings that support its competitive position in the financial services marketplace (see the "Ratings" section below for further discussion), and stockholder returns. As a result, the Company may from time to time raise capital from the issuance of debt, common equity, preferred stock, equity-related debt or other capital securities and is continuously evaluating strategic
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opportunities. The issuance of debt, common equity, equity-related debt or other capital securities could result in the dilution of stockholder interests or reduced net income to common stockholders due to additional interest expense or preferred stock dividends.
Shelf Registrations
The Hartford filed an automatic shelf registration statement with the SEC on September 23, 2024 that permits it to offer and sell debt and equity securities during the three-year life of the registration statement.
For further information regarding shelf registrations, see Note 13 - Debt of Notes to Consolidated Financial Statements.
Revolving Credit Facility
The Hartford has a $750 senior unsecured revolving credit facility, including $100 available to support letters of credit (the "Credit Facility"). On September 24, 2025, The Hartford amended and restated the Credit Facility, which, among other changes, extends the term of the facility through September 24, 2030. As of December 31, 2025, no borrowings were outstanding and no letters of credit were issued under the Credit Facility and The Hartford was in compliance with all financial covenants. For further information regarding the Credit Facility, see Note 13 – Debt of Notes to Consolidated Financial Statements.
Intercompany Liquidity Agreements
The Company has $2.0 billion available under an intercompany liquidity agreement that allows for short-term advances of funds among the HIG Holding Company and certain affiliates of up to $2.0 billion for liquidity and other general corporate purposes. The Connecticut Insurance Department ("CID") granted approval for certain affiliated insurance companies that are parties to the agreement to treat receivables from a parent, including the HIG Holding Company, as admitted assets for statutory accounting purposes.
As of December 31, 2025, $1.85 billion was available, $150 was outstanding between certain affiliates, and there were no amounts outstanding at the HIG Holding Company. As of February 19, 2026, $1.86 billion was available, $145 was outstanding between certain affiliates and there were no amounts outstanding at the HIG Holding Company.
Collateralized Advances with Federal Home Loan Bank of Boston
The Company’s subsidiaries, Hartford Fire Insurance Company (“Hartford Fire”) and HLA, are members of the FHLBB. Membership allows these subsidiaries access to collateralized advances, which may be short- or long-term with fixed or variable rates. Advances may be used to support general corporate purposes, which would be presented as short- or long-term debt, or to earn incremental investment income, which would be presented in other liabilities consistent with other collateralized financing transactions. Prior to October 1, 2025, the CID permitted Hartford Fire and HLA to pledge up to $1.4 billion and $0.6 billion in qualifying assets, respectively without prior approval to secure FHLBB advances. Effective October 1, 2025, the Company is no longer subject to the CID hypothecation limit or approval related to FHLBB advances. The
Company's pledge capacity is now subject to FHLBB's collateral eligibility requirements, which may be amended at their discretion. Based on these requirements, the Company estimates that Hartford Fire can pledge up to $2.6 billion and HLA can pledge up to $2.2 billion to secure FHLBB advances. As of December 31, 2025, there were no advances outstanding.
For further information regarding the Company's Collateralized Advances with Federal Home Loan Bank of Boston, see Note 13 - Debt of Notes to Consolidated Financial Statements.
Lloyd's Letter of Credit Facility
The Hartford has a committed credit facility agreement with a syndicate of lenders (the "Lloyd's Facility"). On October 21, 2024, The Hartford amended and restated its Lloyd's Facility agreement. The amended and restated Lloyd's Facility has two tranches with one tranche extending a $74 commitment and the other tranche extending a £74 million ($100 as of December 31, 2025) commitment. As of December 31, 2025, letters of credit with an aggregate face amount of $74 and £74 million, or $100, 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 December 31, 2025, The Hartford was in compliance with all financial covenants of the facility.
For further information regarding the Lloyd's Facility, see Note 13 - Debt of Notes to Consolidated Financial Statements.
Pension Plans and Other Postretirement Benefits
While the Company has significant discretion in making voluntary contributions to the U.S. qualified defined benefit pension plan, minimum contributions are mandated in certain circumstances pursuant to the Employee Retirement Income Security Act of 1974, as amended by the Pension Protection Act of 2006, the Worker, Retiree, and Employer Recovery Act of 2008, the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010, the Moving Ahead for Progress in the 21st Century Act of 2012 (MAP-21) and Internal Revenue Code regulations.
The Company did not make any contributions to the U.S. qualified defined benefit pension plan in 2025, 2024 and 2023. In 2025 and 2023, the Company funded $1 and $3, respectively to a rabbi trust that is designated for other defined benefit pension plans and contributed $1 and $1, respectively to the Canadian Pension Plan. There were no plan contributions in 2024 for other defined benefit pension plans. The Company made direct benefit payments of $5, $6 and $5 on behalf of the other postretirement plan in 2025, 2024 and 2023, respectively. No other contributions were made to the other postretirement plan in 2025, 2024 and 2023. The Company’s 2025, 2024 and 2023 required minimum funding contributions were immaterial. The Company does not have a 2026 required minimum funding contribution for the U.S. qualified defined benefit pension plan and the funding requirements for all pension plans are expected to be immaterial. The Company has not determined whether, and to what extent, contributions may be made to the U.S. qualified defined benefit pension plan in 2026. The Company will monitor the funded status of the U.S. qualified defined benefit pension plan during 2026 to make this determination. As
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of December 31, 2025, the U.S. qualified defined benefit pension plan is fully funded and in an asset position. For further discussion of pension and other postretirement benefit obligations, see Note 18 - Employee Benefit Plans of Notes to Consolidated Financial Statements.
Derivative Commitments
Certain of the Company’s derivative agreements contain provisions that are tied to the financial strength ratings, as set by nationally recognized statistical rating agencies, of the individual legal entity that entered into the derivative agreement. If the legal entity’s financial strength were to fall below certain ratings, the counterparties to the derivative agreements could terminate agreements and demand immediate settlement of the outstanding net derivative positions transacted under each agreement. For further information, refer to Note 14 - Commitments and Contingencies of Notes to Consolidated Financial Statements.
As of December 31, 2025, no derivative positions would be subject to immediate termination in the event of a downgrade of one level below the current financial strength ratings. This could change as a result of changes in our hedging activities or to the extent changes in contractual terms are negotiated.
Insurance Operations
While subject to variability period to period, underwriting and investment cash flows continue to provide sufficient liquidity to meet anticipated demands.
The principal sources of operating funds are premiums, fees earned from insurance and administrative service agreements, and investment income, while investing cash flows primarily originate from maturities and sales of invested assets.
The Company’s insurance operations consist of property and casualty insurance products (collectively referred to as “Property & Casualty Operations”) and Employee Benefits products.
The Company's insurance operations hold fixed maturity securities, including a significant short-term investment position (securities with maturities of one year or less at the time of purchase), to meet liquidity needs. Liquidity requirements that are unable to be funded by the Company's insurance operations' short-term investments would be satisfied with current operating funds, including premiums or investing cash flows, which includes proceeds received through the sale of invested assets. A sale of invested assets could result in significant realized losses.
The following tables represent the fixed maturity holdings, including the aforementioned cash and short-term investments available to meet liquidity needs, for each of the Company’s insurance operations.
Property & Casualty Operations
December 31, 2025
Fixed maturities
Short-term investments
Cash
Less: Derivative collateral
Total
Property & Casualty operations invested assets also include $121 in equity securities, $5.3 billion in mortgage loans and $4.5 billion in limited partnerships and other alternative investments.
Employee Benefits Operations
December 31, 2025
Fixed maturities
Short-term investments
Cash
Less: Derivative collateral
Total
Employee Benefits operations invested assets also include $23 in equity securities, $1.6 billion in mortgage loans and $1.2 billion in limited partnerships and other alternative investments.
The primary uses of funds are to pay claims, claim adjustment expenses, commissions and other underwriting and insurance operating costs, to pay taxes, to purchase new investments and to make dividend payments to the HIG Holding Company.
Property & Casualty reserves for unpaid losses and loss adjustment expenses as of December 31, 2025 were $38.2 billion and net of reinsurance and other recoverables were $31.4 billion. Reserves for Property & Casualty unpaid losses and loss adjustment expenses include case reserves and IBNR reserves. The ultimate amount to be paid to settle both case and IBNR reserves is an estimate, subject to significant uncertainty. The actual amount to be paid is not finally determined until the Company reaches a settlement with the claimant. Final claim settlements may vary significantly from the present estimates, particularly since many claims will not be settled until well into the future. For a discussion of The Hartford’s judgment in estimating reserves for Property & Casualty see Part II, Item 7, MD&A - Critical Accounting Estimates, Property & Casualty Insurance Product Reserves, Net of Reinsurance, and for historical payments by reserve line net of reinsurance, see Note 10 - Reserve for Unpaid Losses and Adjustment Expenses of Notes to Consolidated Financial Statements. The timing of future payments for the next twelve months and for beyond twelve months could vary materially from historical payment patterns due to, among other things, changes in claim reporting and payment patterns and large settlements. In particular, there is significant uncertainty over the claim payment patterns of asbestos and environmental .
Employee Benefits reserves as of December 31, 2025 were $8.8 billion and net of reinsurance were $8.5 billion. Group life and disability obligations are estimated using assumptions based on the Company’s historical experience, modified for recent observed trends. For a discussion of The Hartford’s
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judgment in estimating LTD reserves for Employee Benefits see Part II, Item 7, MD&A - Critical Accounting Estimates, Employee Benefit LTD Reserves, Net of Reinsurance. For additional information about future policy benefits and other policyholder funds and benefits payable, see Note 11 - Reserve for Future Policy Benefits and Note 12 - Other Policyholder Funds and Benefits Payable of Notes to Consolidated Financial Statements. For historical payments by reserve line, net of reinsurance, see Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Consolidated Financial Statements. Due to the significance of the assumptions used, payments for the next twelve months and beyond twelve months could materially differ from historical patterns.
Corporate reserves as of December 31, 2025 were $356, and net of reinsurance were $143. These reserves related to retained run-off liabilities of its former life and annuity business. For additional information about future policy benefits and other policyholder funds and benefits payable, see Note 11 - Reserve for Future Policy Benefits and Note 12 - Other Policyholder Funds and Benefits Payable of Notes to Consolidated Financial Statements.
Hartford Funds
Hartford Funds' principal sources of operating funds are fees earned from basis points on assets under management with uses primarily for payments to subadvisors and other general operating expenses. As of December 31, 2025, Hartford Funds cash and short-term investments were $396.
Purchase and Other Obligations
The Hartford’s unfunded commitments to purchase investments in limited partnerships and other alternative investments, mortgage loans, private debt and equity securities, as well as tax credits are disclosed in Note 14 - Commitments and Contingencies of Notes to Consolidated Financial Statements. It is anticipated that these unfunded commitments will be funded through the Company’s normal operating and investing activities.
In the normal course of business, the Company enters into contractual commitments to purchase various goods and services such as maintenance, human resources, and information technology. The Company’s operating lease commitments are disclosed in Note 20 - Leases of Notes to Consolidated Financial Statements. It is anticipated that these purchase commitments and operating lease obligations will be funded through the Company’s normal operating and investing activities.
Capitalization
Capital Structure
December 31, 2025
December 31, 2024
Change
Long-term debt
Total debt
Common stockholders' equity, excluding AOCI, net of tax
Preferred stock
AOCI, net of tax
Total stockholders’ equity
Total capitalization
Debt to stockholders’ equity
Debt to capitalization
Total capitalization increased $2,537, or 12%, as of December 31, 2025 compared to December 31, 2024 primarily due to net income in excess of common stockholder dividends in the period, and a decrease in net unrealized losses on fixed maturities, AFS partially offset by share repurchases.
For additional information on AOCI, net of tax, including unrealized gains (losses) from securities, see Note 17 - Changes in and Reclassifications From Accumulated Other Comprehensive Income (Loss) and Note 5 - Investments of Notes to Consolidated Financial Statements. For additional information on debt, see Note 13 - Debt of Notes to Consolidated Financial Statements.
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Cash Flow
Net cash provided by operating activities
Net cash used for investing activities
Net cash used for financing activities
Cash and restricted cash— end of year
Year ended December 31, 2025 compared to 2024
Net cash provided by operating activities increased slightly in 2025 as compared to the prior year primarily driven by an increase in P&C and Employee Benefits premiums received partially offset by an increase in loss and loss adjustment expenses paid and higher operating expenses, including increased commissions and staffing costs.
Cash used for investing activities decreased slightly in 2025 due to more cash used in financing activities partially offset by more cash generated from operating activities.
Cash used for financing activities increased in 2025 as compared to the prior year primarily driven by an increase in treasury stock acquired through share repurchases, a change from net issuance to net return of shares under incentive and stock compensation plans, and an increase in dividends paid on common stock.
Operating cash flows for the year ended December 31, 2025 have been adequate to meet liquidity requirements.
Equity Markets
For a discussion of the potential impact of the equity markets on capital and liquidity, see the Financial Risk on U.S. Statutory Capital and Liquidity Risk section in this MD&A.
Ratings
Ratings are an important factor in establishing a competitive position in the insurance marketplace and impact the Company's ability to access financing and its cost of borrowing. There can be no assurance that the Company’s ratings will continue for any given period of time, or that they will not be changed. In the event the Company’s ratings are downgraded, the Company’s competitive position, ability to access financing, and its cost of borrowing, may be adversely impacted.
These ratings are not a recommendation to buy, sell or hold any of The Hartford’s securities and they may be revised or withdrawn at any time at the discretion of the rating organization. Each agency’s rating should be evaluated independently of any other agency’s rating. The system and the number of rating categories can vary across rating agencies.
Among other factors, rating agencies consider the level of statutory capital and surplus of our U.S. insurance subsidiaries as well as the level of U.S. GAAP capital held by the Company in determining the Company's financial strength and credit ratings. Rating agencies may implement changes to their capital formulas that have the effect of increasing the amount of capital we must hold in order to maintain our current ratings. See Part I, Item 1A. Risk Factors — “Downgrades in our financial strength or credit ratings may make our products less attractive, increase our cost of capital and inhibit our ability to refinance our debt.”
On July 3, 2025, A.M. Best upgraded the senior debt rating of the Company to "a" from "a-". The upgrade of the debt rating was based on the Company's balance sheet strength, operating performance, favorable business profile and enterprise risk management. A.M. Best also affirmed the insurance financial strength ratings for the Company. A.M. Best’s outlook for all ratings is “stable”.
On August 19, 2025, Standard & Poor's ("S&P") raised the long-term issuer credit and financial strength ratings on The Hartford's core subsidiaries to "AA-" from "A+" and the issuer credit rating on the Company to "A-" from "BBB+". At the same time, S&P upgraded all debt ratings of the Company, including raising the senior debt rating to "A-" from "BBB+". These upgrades reflect improved underwriting performance, strong profitability, and risk management that have increased the Company's capital resiliency. S&P's outlook for all ratings is "stable".
On October 10, 2025, Moody's upgraded the senior unsecured debt rating of the Company to "A3" from "Baa1", upgraded the insurance financial strength ratings (IFS) of The Hartford's primary P&C insurance subsidiaries to "Aa3" from "A1", and affirmed the IFS rating of HLA at "A1". The ratings upgrade reflects the Company's track record of strong, stable profitability and strong risk adjusted capitalization supported by well diversified revenues and earnings from its P&C insurance, Employee Benefits and Hartford Funds businesses. Moody's outlook for all ratings is "stable".
Table of Contents
Index to MD&A
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Insurance Financial Strength Ratings as of February 19, 2026
A.M. Best
Standard & Poor's
Moody's
Hartford Fire Insurance Company
Hartford Life and Accident Insurance Company
Navigators Insurance Company
Not Rated
Other Ratings:
The Hartford Insurance Group, Inc.:
Senior debt
Statutory Capital
U.S. Statutory Capital Rollforward for the Company's Insurance Subsidiaries
Property and Casualty Insurance Subsidiaries [1] [2]
Employee Benefits Insurance Subsidiary
Total
U.S. statutory capital at January 1, 2025
Statutory income
Dividends to parent
Other items
Net change to U.S. statutory capital
U.S. statutory capital at December 31, 2025
[1] The statutory capital for property and casualty insurance subsidiaries in this table does not include the value of an intercompany note owed by HHI to Hartford Fire Insurance Company.
[2] Excludes insurance operations in the U.K.
U.S. STAT to U.S. GAAP Differences
Significant differences between U.S. GAAP stockholders’ equity and aggregate statutory capital prepared in accordance with U.S. STAT include the following:
• U.S. STAT excludes equity of non-insurance and foreign insurance subsidiaries not held by U.S. insurance subsidiaries.
• Costs incurred by the Company to acquire insurance policies are deferred under U.S. GAAP while those costs are expensed immediately under U.S. STAT.
• Temporary differences between the book and tax basis of an asset or liability which are recorded as deferred tax assets are evaluated for recoverability under U.S. GAAP while these amounts are then subject to further admissibility tests under U.S. STAT.
• The assumptions used in the determination of Employee Benefits reserves (i.e., for Employee Benefits contracts) are prescribed under U.S. STAT, while the assumptions used under U.S. GAAP are generally the Company’s best estimates.
• The difference between the amortized cost and fair value of fixed maturity and other investments, net of tax, is recorded as an increase or decrease to the carrying value of the related asset and to equity under U.S. GAAP, while, under
U.S. STAT, most investments are carried at amortized cost with only certain securities carried at fair value, such as equity securities and certain lower rated bonds required by the NAIC to be recorded at the lower of amortized cost or fair value.
• U.S. STAT for life insurance companies like HLA establishes a formula reserve for realized and unrealized losses due to default and equity risks associated with certain invested assets (the Asset Valuation Reserve), while U.S. GAAP does not. Also, for those realized gains and losses caused by changes in interest rates, U.S. STAT for life insurance companies defers and amortizes the gains and losses into income over the original life to maturity of the asset sold (the Interest Maintenance Reserve) while U.S. GAAP does not.
• Goodwill arising from the acquisition of a business is tested for recoverability on an annual basis (or more frequently, as necessary) for U.S. GAAP, while under U.S. STAT goodwill is amortized over a period not to exceed 10 years and the amount of goodwill admitted as an asset is limited.
• The deferred gain on retroactive reinsurance for losses ceded to the A&E ADC agreement is recognized within a special category of surplus under U.S. STAT but is recognized within other liabilities under U.S. GAAP. In addition, the pattern of amortizing the deferred gain for U.S. GAAP and releasing special surplus for STAT is different.
Table of Contents
Index to MD&A
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
For U.S. GAAP the deferred gain is amortized in proportion of actual recoveries collected to total expected recoveries, while for STAT special surplus is released dollar for dollar once recoveries collected exceed the reinsurance premium.
In addition, certain assets, including a portion of premiums receivable and fixed assets, are non-admitted (recorded at zero value and charged against surplus) under U.S. STAT. U.S. GAAP generally evaluates assets based on their recoverability.
Risk Based Capital
The Company's U.S. insurance companies' states of domicile impose RBC requirements. The requirements provide a means of measuring the minimum amount of statutory capital appropriate for an insurance company to support its overall business operations based on its size and risk profile. Companies below specific trigger points or ratios are classified within certain levels, each of which requires specified corrective action. All of the Company's U.S. operating insurance subsidiaries had RBC ratios in excess of the minimum levels required by the applicable insurance regulations.
Similar to the RBC ratios that are employed by U.S. insurance regulators, regulatory authorities in the international jurisdictions in which the Company operates generally establish minimum solvency requirements for insurance companies. All of the Company's international insurance subsidiaries expect to maintain capital levels in excess of the minimum levels required by the applicable regulatory authorities.
Sensitivity
In any particular period, statutory capital amounts and RBC ratios may increase or decrease depending upon a variety of factors. The amount of change in the statutory capital or RBC ratios can vary based on individual factors and may be compounded in extreme scenarios or if multiple factors occur at the same time. At times the impact of changes in certain market factors or a combination of multiple factors on RBC ratios can be counterintuitive. For further discussion on these factors, see MD&A - Enterprise Risk Management, Financial Risk on Statutory Capital.
Statutory capital at the insurance subsidiaries has been maintained at capital levels commensurate with the Company's desired RBC ratios and ratings from rating agencies. The amount of statutory capital can increase or decrease depending on a number of factors affecting insurance results including, among other factors, the level of catastrophe claims incurred, the amount of reserve development, the effect of changes in interest rates on investment income and the discounting of loss reserves, and the effect of realized gains and losses on investments.
Contingencies
Legal Proceedings
For a discussion regarding The Hartford’s legal proceedings, see the information contained in Note 14 - Commitments and Contingencies of the Notes to Consolidated Financial Statements and Part I, Item 3 — Legal Proceedings, which are incorporated herein by reference.
Legislative and Regulatory Developments
Congress may consider a variety of proposals including a possible increase in the corporate tax rate to offset the cost of any new spending. Tax proposals and regulatory initiatives that may be considered by Congress and/or the U.S. Treasury Department could have a material effect on the Company and its insurance businesses. The nature and timing of any such Congressional or regulatory action with respect to any such efforts is unclear.
Guaranty Fund and Other Insurance-related Assessments
For a discussion regarding Guaranty Funds and Other Insurance-related Assessments, see Note 14 - Commitments and Contingencies of Notes to Consolidated Financial Statements.
Impact of New Accounting Standards
For a discussion of accounting standards, see Note 1 - Basis of Presentation and Significant Accounting Policies of Notes to Consolidated Financial Statements.
Table of Contents
Index to MD&A
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Acronyms
Asbestos and Environmental
HIG
The Hartford Insurance Group, Inc.
ABS
Asset-Backed Securities
HIMCO
Hartford Investment Management Company
ACL
Allowance for Credit Losses
HLA
Hartford Life and Accident Insurance Company
ADC
Adverse Development Cover
IBNR
Incurred But Not Reported
AFS
Available-For-Sale
Information Technology
ALAE
Allocated Loss Adjustment Expenses
LAE
Loss Adjustment Expense
AOCI
Accumulated Other Comprehensive Income (Loss)
LCL
Liability for Credit Losses
AUM
Assets Under Management
LTD
Long-Term Disability
BSA
Boy Scouts of America
LTV
Loan-to-Value
CAY
Current Accident Year
Management's Discussion and Analysis of Financial Conditions and Results of Operations
CLOs
Collateralized Loan Obligations
NAIC
National Association of Insurance Commissioners
CMBS
Commercial Mortgage-Backed Securities
NIC
Navigators Insurance Company
CODM
Chief Operating Decision Maker
NICO
National Indemnity Company, a subsidiary of Berkshire Hathaway Inc. (“Berkshire”)
CPRI
Credit and Political Risk Insurance
Not Meaningful
DAC
Deferred Policy Acquisition Costs
NSIC
Navigators Specialty Insurance Company
DLR
Disabled Life Reserve
OCI
Other Comprehensive Income
Directors and Officers
OTC
Over-the-Counter
DSCR
Debt Service Coverage Ratio
Property and Casualty
ELR
Expected Loss Ratio
Political Violence and Terrorism
ERCC
Enterprise Risk and Capital Committee
PYD
Prior Accident Year Development
ESPP
The Hartford Employee Stock Purchase Plan
RBC
Risk-Based Capital
ETF
Exchange-Traded Funds
RMBS
Residential Mortgage-Backed Securities
FAL
Funds at Lloyd's
ROA
Return on Assets
FASB
Financial Accounting Standards Board
ROE
Return on Equity
FHCF
Florida Hurricane Catastrophe Fund
SEC
Securities and Exchange Commission
FHLBB
Federal Home Loan Bank of Boston
SCR
Solvency Capital Requirement
FVO
Fair Value Option
SOFR
Secured Overnight Financing Rate
GAAP
Generally Accepted Accounting Principles
TRIPRA
Terrorism Risk Insurance Program Reauthorization Act
HHI
Hartford Holdings, Inc.
ULAE
Unallocated Loss Adjustment Expenses
Table of Contents
Part II - Item 9A. Controls and Procedures
