Hartford Insurance Group 10-K 2017-12-31

10-K 1 hig1231201710-kdocument.htm 10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2017

or

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-13958

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware		13-3317783
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

One Hartford Plaza, Hartford, Connecticut 06155

(Address of principal executive offices) (Zip Code)

(860) 547-5000

(Registrant’s telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT

(ALL OF WHICH ARE LISTED ON THE NEW YORK STOCK EXCHANGE INC.):

Common Stock, par value $0.01 per share

Warrants (expiring June 26, 2019)

6.10% Notes due October 1, 2041

7.875% Fixed-to-Floating Rate Junior Subordinated Debentures due 2042

SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT:

None

Indicate by check mark:		Yes	No
•	if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.	þ
•	if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.		þ
•	whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.	þ
•	whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).	þ
•	if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.	þ
•	whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
	Large accelerated filer þ Accelerated filer o Non-accelerated filer o Smaller reporting company o Emerging growth company o
•	whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)		þ

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

The aggregate market value of the shares of Common Stock held by non-affiliates of the registrant as of June 30, 2017 was approximately $19 billion, based on the closing price of $52.57 per share of the Common Stock on the New York Stock Exchange on June 30, 2017.

As of February 21, 2018, there were outstanding 356,981,387 shares of Common Stock, $0.01 par value per share, of the registrant.

Documents Incorporated by Reference

Portions of the registrant’s definitive proxy statement for its 2018 annual meeting of shareholders are incorporated by reference in Part III of this Form 10-K.

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

ANNUAL REPORT ON FORM 10-K

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2017

TABLE OF CONTENTS

Item	Description	Page
	Part I
1	BUSINESS	6
1A.	RISK FACTORS	17
1B.	UNRESOLVED STAFF COMMENTS	None
2	PROPERTIES	28
3	LEGAL PROCEEDINGS	28
4	MINE SAFETY DISCLOSURES	Not Applicable
	Part II
5	MARKET FOR THE HARTFORD'S COMMON EQUITY, RELATED STOCKHOLDER MATTER AND ISSUER PUCHASES OF EQUITY SECURITIES	29
6	SELECTED FINANCIAL DATA	31
7	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	32
7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	[a]
8	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	[b]
9	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	None
9A.	CONTROLS AND PROCEDURES	108
9B.	OTHER INFORMATION	None
	Part III
10	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE OF THE HARTFORD	110
11	EXECUTIVE COMPENSATION	[c]
12	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	111
13	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	[d]
14	PRINCIPAL ACCOUNTING FEES AND SERVICES	[e]
	Part IV
15	EXHIBITS, FINANCIAL STATEMENT SCHEDULES	112
	EXHIBITS INDEX	I-1
16	FORM 10-K SUMMARY	Not Applicable
	SIGNATURES	I-5

[a] The information required by this item is set forth in the Enterprise Risk Management section of Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations and is incorporated herein by reference.

[b] See Index to Consolidated Financial Statements and Schedules elsewhere herein.

[c] The information called for by Item 11 will be set forth in the Proxy Statement under the subcaptions "Compensation Discussion and Analysis", "Executive Compensation", "Director Compensation", "Report of the Compensation and Management Development Committee", and "Compensation and Management Development Committee Interlocks and Insider Participation" and is incorporated herein by reference.

[d] Any information called for by Item 13 will be set forth in the Proxy Statement under the caption and subcaption "Board and Governance Matters" and "Director Independence" and is incorporated herein by reference.

[e] The information called for by Item 14 will be set forth in the Proxy Statement under the caption "Audit Matters" and is incorporated herein by reference.

Forward-Looking Statements

Certain of the statements contained herein are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “projects,” and similar references to future periods.

Forward-looking statements are based on management's current expectations and assumptions regarding future economic, competitive, legislative and other developments and their potential effect upon The Hartford Financial Services Group, Inc. and its subsidiaries (collectively, the “Company” or “The Hartford”). Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual results could differ materially from expectations, depending on the evolution of various factors, including the risks and uncertainties identified below, as well as factors described in such forward-looking statements or in Part I, Item 1A. Risk Factors, in Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, and those identified from time to time in our other filings with the Securities and Exchange Commission.

•	Risks Relating to Economic, Political and Global Market Conditions:

◦	challenges related to the Company’s current operating environment, including global political, economic and market conditions, and the effect of financial market disruptions, economic downturns or other potentially adverse macroeconomic developments on the demand for our products and returns in our investment portfolios;

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

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

◦	the impact on our investment portfolio if our investment portfolio is concentrated in any particular segment of the economy;

•	Insurance Industry and Product-Related Risks:

◦	the possibility of unfavorable loss development, including with respect to long-tailed exposures;

◦	the possibility of a pandemic, earthquake, or other natural or man-made disaster that may adversely affect our businesses;

◦	weather and other natural physical events, including the severity and frequency of storms, hail, winter storms, hurricanes and tropical storms, as well as climate change and its potential impact on weather patterns;

◦	the possible occurrence of terrorist attacks and the Company’s inability to contain its exposure as a result of, among other factors, the inability to exclude coverage for terrorist attacks from workers' compensation policies and limitations on reinsurance coverage from the federal government under applicable laws;

◦	the Company’s ability to effectively price its property and casualty policies, including its ability to obtain regulatory consents to pricing actions or to non-renewal or withdrawal of certain product lines;

◦	actions by competitors that may be larger or have greater financial resources than we do;

◦	technological changes, such as usage-based methods of determining premiums, advancements in automotive safety features, the development of autonomous vehicles, and platforms that facilitate ride sharing, which may alter demand for the Company's products, impact the frequency or severity of losses, and/or impact the way the Company markets, distributes and underwrites its products;

◦	the Company's ability to market, distribute and provide insurance products and investment advisory services through current and future distribution channels and advisory firms;

◦	the uncertain effects of emerging claim and coverage issues;

•	Financial Strength, Credit and Counterparty Risks:

◦	risks to our business, financial position, prospects and results associated with negative rating actions or downgrades in the Company’s financial strength and credit ratings or negative rating actions or downgrades relating to our investments;

◦	the impact on our statutory capital of various factors, including many that are outside the Company’s control, which can in turn affect our credit and financial strength ratings, cost of capital, regulatory compliance and other aspects of our business and results;

◦	losses due to nonperformance or defaults by others, including sourcing partners, derivative counterparties and other third parties;

◦	the potential for losses due to our reinsurers' unwillingness or inability to meet their obligations under reinsurance contracts and the availability, pricing and adequacy of reinsurance to protect the Company against losses;

◦	regulatory limitations on the ability of the Company and certain of its subsidiaries to declare and pay dividends;

•	Risks Relating to Estimates, Assumptions and Valuations:

◦	risk associated with the use of analytical models in making decisions in key areas such as underwriting, capital management, hedging, reserving, and catastrophe risk management;

◦	the potential for differing interpretations of the methodologies, estimations and assumptions that underlie the Company’s fair value estimates for its investments and the evaluation of other-than-temporary impairments on available-for-sale securities;

◦	the significant uncertainties that limit our ability to estimate the ultimate reserves necessary for asbestos and environmental claims;

•	Strategic and Operational Risks:

◦	the Company’s ability to maintain the availability of its systems and safeguard the security of its data in the event of a disaster, cyber or other information security incident or other unanticipated event;

◦	the risks, challenges and uncertainties associated with capital management plans, expense reduction initiatives and other actions, which may include acquisitions, divestitures or restructurings;

◦	the potential for difficulties arising from outsourcing and similar third-party relationships;

◦	the Company’s ability to protect its intellectual property and defend against claims of infringement;

•	Regulatory and Legal Risks:

◦	the cost and other potential effects of increased regulatory and legislative developments, including those that could adversely impact the demand for the Company’s products, operating costs and required capital levels;

◦	unfavorable judicial or legislative developments;

◦	the impact of changes in federal or state tax laws;

◦	regulatory requirements that could delay, deter or prevent a takeover attempt that shareholders might consider in their best interests;

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

•	Risks Related to the Company's Life and Annuity Business in Discontinued Operations

◦	the risks related to the Company's ability to close its previously announced sale of its life and annuity run-off book of business, which is subject to several closing conditions, including many that are outside of the Company's control;

◦	the risks related to political, economic and global economic conditions, including interest rate, equity and credit spread risks;

◦	the impact on our investment portfolio if our investment portfolio is concentrated in any particular segment of the economy;

◦	risks related to negative rating actions or downgrades in the financial strength and credit ratings of Hartford Life Insurance Company or Hartford Life and Annuity Insurance Company or negative rating actions or downgrades relating to our investments;

◦	the volatility in our statutory and United States ("U.S.") Generally Accepted Accounting Principles ("GAAP") earnings and potential material changes to our results resulting from our risk management program to emphasize protection of economic value;

◦	the potential for losses due to our reinsurers’ unwillingness or inability to meet their obligations under reinsurance contracts;

◦	the potential for differing interpretations of the methodologies, estimations and assumptions that underlie the fair value estimates for investments and the evaluation of other-than-temporary impairments on available for sale securities;

◦	the potential for further acceleration of deferred policy acquisition cost amortization and an increase in reserves for certain guaranteed benefits in our variable annuities;

◦	changes in federal or state tax laws that would impact the tax-favored status of life and annuity contracts; and

◦	changes in accounting and financial reporting of the liability for future policy benefits, including how the life and annuity businesses account for deferred acquisition costs and market risk benefits on variable annuity contracts and the discounting of life contingent fixed annuities.

Any forward-looking statement made by the Company in this document speaks only as of the date of the filing of this Form 10-K. Factors or events that could cause the Company’s actual results to differ may emerge from time to time, and it is not possible for the Company to predict all of them. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.

Part I - Item 1. Business

Item 1. BUSINESS

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

GENERAL

The Hartford Financial Services Group, Inc. (together with its subsidiaries, “The Hartford”, the “Company”, “we”, or “our”) is a holding company for a group of subsidiaries that provide property and casualty insurance, group benefits and mutual funds to individual and business customers in the United States. In December 2017, the Company announced the signing of a definitive agreement to sell its life and annuity operating subsidiaries and, accordingly, the assets and liabilities of those subsidiaries have been presented as held for sale with results of operations from that business reflected as discontinued operations. See Note 20 - Business Dispositions and Discontinued Operations of Notes to Consolidated Financial Statements. The Hartford is headquartered in Connecticut and its oldest subsidiary, Hartford Fire Insurance Company, dates to 1810. At December 31, 2017, total assets and total stockholders’ equity of The Hartford were $225.3 billion and $13.5 billion, respectively.

ORGANIZATION

The Hartford strives to maintain and enhance its position as a market leader within the financial services industry. The Company sells diverse and innovative products through multiple distribution channels to individuals and businesses and is considered a leading property and casualty insurer. The Company endeavors to expand its insurance product offerings and distribution and capitalize on the strength of the Company's brand. The Hartford Stag logo is one of the most recognized symbols in the financial services industry. The Company is also working to increase efficiencies through investments in technology.

As a holding company, The Hartford is separate and distinct from its subsidiaries and has no significant business operations of its own. The Company relies on the dividends from its insurance companies and other subsidiaries as the principal source of cash flow to meet its obligations, pay dividends and repurchase common stock. Information regarding the cash flow and liquidity needs of The Hartford Financial Services Group, Inc. may be found in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) — Capital Resources and Liquidity.

REPORTING SEGMENTS

The Hartford conducts business principally in five reporting segments including Commercial Lines, Personal Lines, Property & Casualty ("P&C") Other Operations, Group Benefits and Mutual Funds, as well as a Corporate category. The Hartford includes in its Corporate category discontinued operations of the Company's life and annuity run-off business accounted for as held for sale, reserves for structured settlement and terminal funding agreement liabilities retained, capital raising activities (including debt financing and related interest expense), purchase accounting adjustments related to goodwill and other expenses not allocated to the reporting segments.

2017 Revenues of $16,974 [1] by Segment

[1] Includes Revenue of $120 for P&C Other Operations and $26 for Corporate.

The following discussion describes the principal products and services, marketing and distribution, and competition of The Hartford's reporting segments. For further discussion of the reporting segments, including financial disclosures of revenues by product line, net income (loss), and assets for each reporting segment, see Note 4 - Segment Information of Notes to Consolidated Financial Statements.

Part I - Item 1. Business

COMMERCIAL LINES

2017 Earned Premiums of $6,865 by Line of Business

2017 Earned Premiums of $6,865 by Product

Principal Products and Services

Automobile	Covers damage to a business's fleet of vehicles due to collision or other perils (automobile physical damage). In addition to first party automobile physical damage, commercial automobile covers liability for bodily injuries and property damage suffered by third parties and losses caused by uninsured or under-insured motorists.
Property	Covers the building a business owns or leases as well as its personal property, including tools and equipment, inventory, and furniture. A commercial property insurance policy covers losses resulting from fire, wind, hail, earthquake, theft and other covered perils, including coverage for assets such as accounts receivable and valuable papers and records. Commercial property may include specialized equipment insurance, which provides coverage for loss or damage resulting from the mechanical breakdown of boilers and machinery, and ocean and inland marine insurance, which provides coverage for goods in transit and unique, one-of-a-kind exposures.
General Liability	Covers a business in the event it is sued for causing harm to a person and/or damage to property. General liability insurance covers third-party claims arising from accidents occurring on the insured’s premises or arising out of their operations. General liability insurance may also cover losses arising from product liability and provide replacement of lost income due to an event that interrupts business operations.
Package Business	Covers both property and general liability damages.
Workers' Compensation	Covers employers for losses incurred due to employees sustaining an injury, illness or disability in connection with their work. Benefits paid under workers’ compensation policies may include reimbursement of medical care costs, replacement income, compensation for permanent injuries and benefits to survivors. Workers’ compensation is provided under both guaranteed cost policies (coverage for a fixed premium) and loss sensitive policies where premiums are adjustable based on the loss experience of the employer.
Professional Liability	Covers liability arising from directors and officers acting in their official capacity and liability for errors and omissions committed by professionals and others. Coverage may also provide employment practices insurance relating to allegations of wrongful termination and discrimination.
Bond	Encompasses fidelity and surety insurance, including commercial surety, contract surety and fidelity bonds. Commercial surety includes bonds that insure non-performance by contractors, license and permit bonds to help meet government-mandated requirements and probate and judicial bonds for fiduciaries and civil court proceedings. Contract surety bonds may include payment and performance bonds for contractors. Fidelity bonds may include ERISA bonds related to the handling of retirement plan assets and bonds protecting against employee theft or fraud.

Through its three lines of business of small commercial, middle market and specialty, Commercial Lines principally provides workers’ compensation, property, automobile and general liability insurance products to businesses, primarily throughout the United States. In addition, the specialty line of business provides

professional liability, bond, loss-sensitive workers compensation, general liability, automobile liability and automobile physical damage. The majority of Commercial Lines written premium is generated by small commercial and middle market, which provide coverage options and customized pricing based on the

policyholder’s individual risk characteristics. Within small commercial, both property and general liability coverages are offered under a single package policy, marketed under the Spectrum name. Specialty provides a variety of customized insurance products and services.

Small commercial provides coverages for small businesses, which the Company considers to be businesses with an annual payroll under $12, revenues under $25 and property values less than $20 per location. Through Maxum Specialty Insurance Group ("Maxum"), small commercial also provides excess and surplus lines coverage to small businesses including umbrella, general liability, property and other coverages. Middle market provides insurance coverages to medium-sized businesses, which are companies whose payroll, revenue and property values exceed the small business definition. The Company has a small amount of property and casualty business written internationally. For U.S. exporters and other U.S. companies with international exposures, the Company covers property, marine and liability risks outside the U.S. as the assuming reinsurer under a reinsurance agreement with a third party.

In addition to offering standard commercial lines products, middle market includes program business which provides tailored programs, primarily to customers with common risk characteristics. Within specialty, a significant portion of the business is written through large deductible programs for national accounts. Other programs written within specialty are retrospectively-rated where the premiums are adjustable based on loss experience. Also within specialty, the Company writes captive programs business, which provides tailored programs to those seeking a loss sensitive solution where premiums are adjustable based on loss experience.

Marketing and Distribution

Commercial Lines provides insurance products and services through the Company’s regional offices, branches and sales and policyholder service centers throughout the United States. The products are marketed and distributed nationally using independent agents, brokers and wholesalers. The independent agent and broker distribution channel is consolidating and this trend is expected to continue. This will likely result in a larger proportion of written premium being concentrated among fewer agents and brokers. In addition, the Company offers insurance products to customers of payroll service providers through its relationships with major national payroll companies and to members of affinity organizations.

Competition

Small Commercial

In small commercial, The Hartford competes against large national carriers, regional carriers and direct writers. Competitors include stock companies, mutual companies and other underwriting organizations. The small commercial market remains highly competitive and fragmented as carriers seek to differentiate themselves through product expansion, price reduction, enhanced service and leading technology. Larger carriers such as The Hartford continually advance their pricing sophistication and ease of doing business with agents and customers through the use of technology, analytics and other capabilities that improve the process of evaluating a risk, quoting new business and servicing customers. The Company also has digital capabilities as customers and distributors demand more

access and convenience, and expanding product and underwriting capabilities to accommodate both larger accounts and a broader risk appetite.

The small commercial market has experienced low written premium growth rates due to current economic conditions. Competitors seek new business by increasing their underwriting appetite, and deepening their relationships with distribution partners. Also, carriers serving middle market-sized accounts are more aggressively competing for small commercial accounts, which are generally less price-sensitive. Some carriers, including start-up and non-traditional carriers, are looking to expand sales of business insurance products to small commercial market insureds through on-line and direct-to-consumer marketing.

Middle Market

Middle market business is considered “high touch” and involves individual underwriting and pricing decisions. The pricing of middle market accounts is prone to significant volatility over time due to changes in individual account characteristics and exposure, as well as legislative and macro-economic forces. National and regional carriers participate in the middle market insurance sector, resulting in a competitive environment where pricing and policy terms are critical to securing new business and retaining existing accounts. Within this competitive environment, The Hartford is working to deepen its product and underwriting capabilities, and leverage its sales and underwriting talent with tools it has introduced in recent years. Through advanced training and data analytics, the Company’s field underwriters are working to improve risk selection and pricing decisions. In product development and related areas such as claims and risk engineering, the Company is extending its capabilities in industry verticals, such as energy, construction, automobile parts manufacturing, food processing and hospitality. Through a partnership with AXA Corporate Solutions, the Company offers business insurance coverages to exporters and other U.S. companies with a physical presence overseas. The Company has also added new middle market underwriters in the Midwest and Western U.S. to deepen relationships with its distribution partners.

Specialty Commercial

Specialty commercial competes on an account-by-account basis due to the complex nature of each transaction. Competition in this market includes stock companies, mutual companies, alternative risk sharing groups and other underwriting organizations.

For specialty casualty businesses, pricing competition continues to be significant, particularly for the larger individual accounts. As a means to mitigate the cost of insurance on larger accounts, more insureds may opt for the loss-sensitive products offered in our national accounts segment, including retrospectively rated contracts, in lieu of guaranteed cost policies. Under a retrospectively-rated contract, the ultimate premium collected from the insured is adjusted based on how incurred losses for the policy year develop over time, subject to a minimum and maximum premium. Within national accounts, the Company is implementing a phased roll out of a new risk management platform, allowing customers better access to claims data and other information needed by corporate risk managers. This investment will allow the Company to work more closely with customers to improve long-term account performance.

Part I - Item 1. Business

In the bond business, favorable underwriting results in recent years has led to increased competition for market share, setting the stage for potential written price decreases.

In professional liability, large and medium-sized businesses are in differing competitive environments. Large public director &

officers coverage, specifically excess layers, is under significant competitive price pressure. The middle market private management liability segment is in a more stable competitive and pricing environment.

PERSONAL LINES

2017 Earned Premiums of $3,690 by Line of Business

2017 Earned Premiums of $3,690 by Product

Principal Products and Services

Automobile	Covers damage to an individual insured’s own vehicle due to collision or other perils and is referred to as automobile physical damage. In addition to first party automobile physical damage, automobile insurance covers

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A decline in equity markets may result in lower earnings from the life and annuity business where fee income is earned based upon the fair value of the assets under management. In addition, certain annuity products have guaranteed minimum death benefits ("GMDB") or guaranteed minimum withdrawal benefits ("GMWB") that increase when equity markets decline requiring more statutory capital to be held. While hedging programs are used to reduce the net economic sensitivity of our potential obligations from guaranteed benefits due to market fluctuations, rising equity markets and/or rising interest rates may nevertheless result in statutory or GAAP losses because of accounting asymmetries between hedging targets and statutory and GAAP accounting principles for the guaranteed benefits.

A low interest rate environment puts pressure on net investment income and could result in lower margins and lower estimated gross profits on certain annuity products included in discontinued operations.

A rise in interest rates, in the absence of other countervailing changes, would reduce the market value of the life and annuity business investment portfolio and, if long-term interest rates were to rise dramatically, certain products within that business might be exposed to disintermediation risk. Disintermediation risk refers to the risk that policyholders may surrender their contracts in a rising interest rate environment, requiring the liquidation of assets in an unrealized loss position.

Some of the in-force variable annuity contracts included in discontinued operations offer guaranteed benefits, including GMDBs and GMWBs. These GMBDs and GMWBs are exposed to interest rate risk and significant equity risk. A decline in equity markets would not only result in lower fee income, but would also increase the Company's exposure to liability for benefit claims. Reinsurance and benefit designs, such as caps, are used to mitigate the exposure associated with GMDB. To minimize the claim exposure and to reduce the volatility of net income associated with the GMWB liability, reinsurance is used in combination with product management actions, such as rider fee increases, investment restrictions and buyout offers, as well as derivative instruments. The contract issuer remains liable for the guaranteed benefits in the event that reinsurers or derivative counterparties are unable or unwilling to pay, which could result in a need for additional capital to support in-force business.

From time to time, the risk management program may be adjusted based on contracts in force, market conditions, or other factors. While these actions may improve the efficiency of our risk management efforts related to these benefits, changes to the risk management program may result in greater statutory and GAAP earnings volatility and, based upon the types of hedging instruments used, can result in potentially material changes to net income (loss) in periods of rising equity market pricing levels, higher interest rates and declines in volatility. The life and annuity run-off business is also subject to the risk that these management actions prove ineffective or that unanticipated policyholder behavior, combined with adverse market events, produces economic losses beyond the scope of the risk management techniques employed, which individually or collectively may have a material adverse effect on the business, financial condition, results of operations and liquidity of the discontinued operations.

The minimum capital that must be held by the life and annuity companies is based on risk-based capital (“RBC”) formulas for life

companies. The RBC formula for life companies establishes capital requirements relating to insurance, business, asset and interest rate risks, including equity, interest rate and expense recovery risks associated with variable annuities and group annuities that contain death benefits or certain withdrawal benefits.

In extreme scenarios of equity market declines and other capital market volatility, the amount of additional statutory reserves that must be held for variable annuity guarantees increases at a greater than linear rate. This reduces the statutory surplus used in calculating RBC ratios. When equity markets increase, surplus levels and RBC ratios would generally be expected to increase. However, as a result of a number of factors and market conditions, including the level of hedging costs and other risk transfer activities, statutory reserve requirements for death and withdrawal benefit guarantees and increases in RBC requirements, surplus and RBC ratios may not increase when equity markets increase. Due to these factors, projecting statutory capital and the related RBC ratios is complex.

The investment portfolio of the life and annuity business included in discontinued operations is also exposed to losses due to nonperformance or defaults by counterparties. For example, if the counterparties to the underlying assets supporting the structured securities we invest in default on their payment obligations, the securities held will incur losses.

While a portion of contracts with GMWB riders are reinsured and the majority of GMDB contracts with net amount at risk are reinsured, the insurers that wrote the contracts remain liable as the direct insurer on all risks reinsured. The inability or unwillingness of any reinsurer to meet its financial obligations, including the impact of any insolvency or rehabilitation proceedings involving a reinsurer, could affect the life and annuity companies’ access to collateral held in trust. This risk may be magnified by a concentration of reinsurance-related credit risk resulting from the sale of the Individual Life and Retirement Products businesses in 2013 though that business is part of the Talcott Resolution operations being sold to the Buyer.

Life and annuity products also contain risks relating to estimates, assumptions and valuations. If assumptions used in estimating future gross profits differ from actual experience, it may accelerate the amortization of deferred acquisition costs ("DAC") and increase reserves for GMDB and GMWB on variable annuities.

Deferred acquisition costs for the variable annuity products included in discontinued operations are amortized over the expected life of the contracts. The remaining deferred but not yet amortized cost is referred to as the DAC asset. These costs are amortized based on the ratio of actual gross profits in the period to the present value of current and future estimated gross profits (“EGPs”). EGP’s are used to determine if a DAC impairment exists. Certain reserves for GMDB and the life contingent portion of GMWB are valued using components of EGPs. The projection of EGPs, or components of EGPs, requires the use of certain assumptions that may not prove accurate, including those related to changes in the separate account fund returns, full or partial surrender rates, mortality, withdrawal benefit utilization, withdrawal rates, annuitization and hedging costs.

In addition, if assumptions about policyholder behavior (e.g., full or partial surrenders, benefit utilization and annuitization) and costs related to mitigating risks, including hedging costs, prove to

Part I - Item 1A. Risk Factors

be inaccurate or if significant or sustained equity market declines occur, there could be a further acceleration of DAC amortization related to variable annuity contracts, and increased reserves for GMDB and life-contingent GMWB.

As noted above, the 2017 tax reform reduced the value of net deferred tax assets, including net deferred tax assets to be transferred to the Buyer. Provisions included in the tax reform legislation further limited the corporate dividends received deduction and there is a risk that Congress could further reduce or eliminate the corporate dividends received deduction altogether.

The 2017 tax reform legislation also changed the formula for calculating life insurance reserves, the effect of which is to reduce the amount of tax deductible life insurance reserves. The 2017 tax reform provided that the amount of that difference be included in income ratably over an eight year period. In addition,

the 2017 tax reform legislation increased the amount of acquisition expenses that are required to be amortized and lengthened the period of time to fifteen years over which these deferred expenses can be amortized. Both provisions were intended to increase a life insurer's taxable income base.

Moreover, many of the life and annuity products included in discontinued operations benefit from one or more forms of tax-favored status under current federal and state income tax regimes. For example, some of the annuity contracts previously sold, allowed policyholders to defer the recognition of taxable income earned within the contract. If, however, the tax treatment of earnings accrued inside an annuity contract changed prospectively, and the tax favored status of existing contracts was grandfathered, holders of existing contracts would be less likely to surrender their annuity contracts.

As of December 31, 2017, The Hartford owned building space of approximately 1.8 million square feet which comprised its Hartford, Connecticut location and other properties within the greater Hartford, Connecticut area. In addition, as of December 31, 2017, The Hartford leased approximately 1.7 million square feet, throughout the United States of America, and

approximately two thousand square feet, in other countries. All of the properties owned or leased are used by one or more of all five reporting segments, depending on the location. For more information on reporting segments, see Part I, Item 1, Business — Reporting Segments. The Company believes its properties and facilities are suitable and adequate for current operations.

LITIGATION

The Hartford is involved in claims litigation arising in the ordinary course of business, both as a liability insurer defending or providing indemnity for third-party claims brought against insureds and as an insurer defending coverage claims brought against it. The Hartford accounts for such activity through the establishment of unpaid loss and loss adjustment expense reserves. Subject to the uncertainties related to The Hartford's asbestos and environmental claims discussed in Note 14 - Commitments and Contingencies of the Notes to Consolidated Financial Statements, management expects that the ultimate liability, if any, with respect to such ordinary-course claims litigation, after consideration of provisions made for potential losses and costs of defense, will not be material to the consolidated financial condition, results of operations or cash flows of The Hartford.

The Hartford is also involved in other kinds of legal actions, some of which assert claims for substantial amounts. In addition to the matters described below, these actions include, among others, putative state and federal class actions seeking certification of a state or national class. Such putative class actions have alleged, for example, underpayment of claims or improper underwriting practices in connection with various kinds of insurance policies, such as personal and commercial automobile, property, disability, and inland marine. The Hartford also is involved in individual actions in which punitive damages are sought, such as claims alleging bad faith in the handling of insurance claims or other allegedly unfair or improper business practices. Like many other insurers, The Hartford also has been joined in actions by asbestos plaintiffs asserting, among other things, that insurers had a duty to protect the public from the dangers of asbestos and that

insurers committed unfair trade practices by asserting defenses on behalf of their policyholders in the underlying asbestos cases. Management expects that the ultimate liability, if any, with respect to such lawsuits, after consideration of provisions made for estimated losses, will not be material to the consolidated financial condition of The Hartford. Nonetheless, given the large or indeterminate amounts sought in certain of these actions, and the inherent unpredictability of litigation, the outcome in certain matters could, from time to time, have a material adverse effect on the Company's results of operations or cash flows in particular quarterly or annual periods.

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

Mutual Funds Litigation

In February 2011, a derivative action was brought on behalf of six Hartford retail mutual funds in the United States District Court for the District of New Jersey, alleging that Hartford Investment Financial Services, LLC (“HIFSCO”), an indirect subsidiary of the Company, received excessive advisory and distribution fees in violation of its statutory fiduciary duty under Section 36(b) of the

Part I - Item 3. Legal Proceedings

Investment Company Act of 1940. During course of litigation, the claims regarding distribution fees were dismissed without prejudice, the lineup funds as plaintiffs changed several times, and the plaintiffs added as a defendant Hartford Funds Management Company (“HFMC”), an indirect subsidiary of the Company that assumed the role of advisor to the funds as of January 2013. In June 2015, HFMC and HIFSCO moved for summary judgment, and plaintiffs cross-moved for partial summary judgment with respect to one fund. In March 2016, the court denied the plaintiff's motion, and granted summary judgment for HIFSCO and HFMC with respect to one fund, leaving six funds and plaintiffs: The Hartford Balanced Fund, The Hartford Capital Appreciation Fund, The Hartford Floating Rate Fund, The

Hartford Growth Opportunities Fund, The Hartford Healthcare Fund and The Hartford Inflation Plus Fund. The court further ruled that the appropriate measure of damages on the surviving claims would be the difference, if any, between the actual advisory fees paid through trial and the fees permitted under the applicable legal standard. A bench trial on the issue of liability was held in November 2016. In February 2017, the court granted judgment for HIFSCO and HFMC as to all claims. Plaintiffs have appealed to the United States Court of Appeals for the Third Circuit.

The Hartford’s common stock is traded on the New York Stock Exchange (“NYSE”) under the trading symbol “HIG”.

High and Low Closing Prices and Quarterly Dividends Declared per Share for the Common Stock of The Hartford

	1st Qtr.			2nd Qtr.			3rd Qtr.			4th Qtr.
2017
Common Stock Price
High	$	49.87		$	52.75		$	56.81		$	57.65
Low	$	47.05		$	47.26		$	51.64		$	54.06
Dividends Declared	$	0.23		$	0.23		$	0.23		$	0.25
2016
Common Stock Price
High	$	46.31		$	46.80		$	44.77		$	48.58
Low	$	37.63		$	40.98		$	39.85		$	42.50
Dividends Declared	$	0.21		$	0.21		$	0.21		$	0.23

On February 22, 2018, The Hartford’s Board of Directors declared a quarterly dividend of $0.25 per common share payable on April 2, 2018 to common shareholders of record as of March 5, 2018. As of February 21, 2018, the Company had approximately 11,641 registered holders of record of the Company's common stock. A substantially greater number of holders of our common stock are “street name” holders or beneficial holders, whose shares are held of record by banks, brokers and other financial institutions. The closing price of The Hartford’s common stock on the NYSE on February 21, 2018 was $53.95.

On June 12, 2017, the Company’s Chief Executive Officer certified to the NYSE that he is not aware of any violation by the Company of NYSE corporate governance listing standards, as required by Section 303A.12(a) of the NYSE’s Listed Company Manual.

There are also various legal and regulatory limitations governing the extent to which The Hartford’s insurance subsidiaries may

extend credit, pay dividends or otherwise provide funds to The Hartford Financial Services Group, Inc. as discussed in the Liquidity Requirements and Sources of Capital section of Part II, Item 7, MD&A — Capital Resources and Liquidity.

For information related to securities authorized for issuance under equity compensation plans, see Part III, Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

During the period October 1, 2017 through October 13, 2017, the Company repurchased 0.9 million common shares at an average price of $55.70 per share. All 0.9 million shares were purchased as part of publicly announced plans or programs.

Effective October 13, 2017, the Company suspended 2017 equity repurchases. The Company does not currently expect to authorize an equity repurchase plan in 2018.

Part II - Item 5. Market for the Hartford's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Total Return to Shareholders

The following tables present The Hartford’s annual return percentage and five-year total return on its common stock including reinvestment of dividends in comparison to the S&P 500 and the S&P Insurance Composite Index.

Annual Return Percentage
	For the years ended
Company/Index	2013		2014		2015		2016		2017
The Hartford Financial Services Group, Inc.	64.12	%	17.13	%	6.12	%	11.76	%	20.26	%
S&P 500 Index	32.39	%	13.69	%	1.38	%	11.96	%	21.83	%
S&P Insurance Composite Index	46.71	%	8.29	%	2.33	%	17.58	%	16.19	%

Cumulative Five-Year Total Return
	Base
	Period			For the years ended
Company/Index	2012			2013		2014		2015		2016		2017
The Hartford Financial Services Group, Inc.	$	100		164.12		192.24		204.00		227.99		274.18
S&P 500 Index	$	100		132.39		150.51		152.59		170.84		208.14
S&P Insurance Composite Index	$	100		146.71		158.86		162.56		191.15		222.09

Part II - Item 6. Selected Financial Data

The following table sets forth the Company's selected consolidated financial data at the dates and for the periods indicated below. The selected financial data should be read in conjunction with Management’s Discussion and Analysis of

Financial Condition and Results of Operations ("MD&A") presented in Item 7 and the Company's Consolidated Financial Statements and the related Notes beginning on page F-1.

in millions, except per share data	2017			2016			2015			2014			2013
Income Statement Data
Total revenues	$	16,974		$	16,107		$	15,997		$	15,713		$	15,966
Income from continuing operations before income taxes	$	723		$	447		$	1,478		$	1,232		$	987
(Loss) Income from continuing operations, net of tax	$	(262	)	$	613		$	1,189		$	925		$	759
(Loss) Income from discontinued operations, net of tax	$	(2,869	)	$	283		$	493		$	(127	)	$	(583	)
Net (loss) income	$	(3,131	)	$	896		$	1,682		$	798		$	176
Balance Sheet Data
Total assets	$	225,260		$	224,576		$	229,616		$	245,566		$	278,339
Short-term debt	$	320		$	416		$	275		$	456		$	438
Total debt (including capital lease obligations)	$	4,998		$	4,910		$	5,216		$	5,966		$	6,401
Total stockholders’ equity	$	13,494		$	16,903		$	18,024		$	19,130		$	19,217
Net (loss) income per common share
Basic	$	(8.61	)	$	2.31		$	4.05		$	1.81		$	0.37
Diluted	$	(8.61	)	$	2.27		$	3.96		$	1.73		$	0.36
Cash dividends declared per common share	$	0.94		$	0.86		$	0.78		$	0.66		$	0.50

Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

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.

On December 3, 2017, Hartford Holdings, Inc., a wholly owned subsidiary of the Company, entered into a definitive agreement to sell all of the issued and outstanding equity of Hartford Life, Inc. (“HLI”), a holding company, and its life and annuity operating subsidiaries. For discussion of this transaction, see Note 20 - Business Dispositions and Discontinued Operations of Notes to Consolidated Financial Statements.

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

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

On July 29, 2016, the Company completed the acquisition of Maxum Specialty Insurance Group and Lattice Strategies LLC. Maxum's revenue and earnings since the acquisition date are included in the operating results of the Company's Commercial Lines reporting segment. Lattice's revenue and earnings since the acquisition date are included in the operating results of the Company's Mutual Funds reporting segment. For discussion of

these transactions, see Note 2 - Business Acquisitions of Notes to Consolidated Financial Statements.

Certain reclassifications have been made to historical financial information presented in Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") to conform to the current period presentation.

Fee income from installment fees reported by the Commercial Lines and Personal Lines reporting segments has been reclassified from underwriting expenses to fee income and included in total revenues. The reclassification of installment fees did not impact previously reported underwriting gain (loss), underwriting ratios, or net income (loss) either in the Commercial Lines or Personal Lines reporting segments and did not impact previously reported consolidated net income or core earnings.

Separately, the flood servicing business has been realigned from specialty commercial within the Commercial Lines reporting segment to the Personal Lines reporting segment. This realignment did not materially impact previously reported Commercial Lines or Personal Lines underwriting results or net income. The realignment of the flood servicing business did not impact previously reported consolidated net income or core earnings.

Assets and liabilities associated with the Company's life and annuity run-off business are now classified as held for sale.

Unpaid losses and loss adjustment expenses and reinsurance recoverables for structured settlements reserves and recoverables due from the Company's life and annuity run-off business now classified as held for sale have been reclassified into the Company's P&C commercial lines business. Annuities purchased from third-party life insurers under structured settlements, including from life and annuity run-off obligations held for sale, are recognized as reinsurance recoverables in cases where the Company has not obtained a release from the claimant. These amounts were previously eliminated in consolidation.

Policy loans have been reclassified to Other investments on the Consolidated Balance Sheets.

Other intangible assets have been reclassified out of Other assets on the Consolidated Balance Sheets into their own line item.

Likewise, amortization of intangible assets has been reclassified out of Insurance operating costs and other expenses on the Consolidated Statements of Operations into their own line item.

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

Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Index

Descripti

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The Company identifies different categories of financial risk, including liquidity, credit, interest rate, equity and foreign currency exchange, as described below.

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.

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 liquidity. The Company also monitors internal and external conditions, and identifies material risk changes and emerging risks that may impact liquidity. The Company's CFO has primary responsibility for liquidity risk.

For further discussion on liquidity see the section on Capital Resources and Liquidity.

Credit 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, but it is also present in the Company’s reinsurance and insurance portfolios.

Impact A decline in creditworthiness is typically associated with an increase in an investment’s credit spread, and potentially result in an increase in other-than-temporary impairments and an increased probability of a realized loss upon sale. Premiums receivable and reinsurance recoverables are also subject to credit risk based on the counterparty’s unwillingness or inability to pay.

Management The objective of the Company’s enterprise credit risk management strategy is to identify, quantify, and manage credit risk on an aggregate portfolio basis and to limit potential losses in accordance with an established credit risk management policy. The Company primarily manages its credit risk by holding a diversified mix of investment grade issuers and counterparties across its investment, reinsurance, and insurance

portfolios. Potential losses are also limited within portfolios by diversifying across geographic regions, asset types, and sectors.

The Company manages credit risk on an on-going basis through the use of various processes and analyses. Both the investment and reinsurance areas have formulated procedures for counterparty approvals and authorizations, which establish minimum levels of creditworthiness and financial stability. Credits considered for investment are subjected to underwriting reviews. Within the investment portfolio, private securities are subject to committee review for approval. Mitigation strategies vary across the three sources of credit risk, but may include:

•	Investing in a portfolio of high-quality and diverse securities;

•	Selling investments subject to credit risk;

•	Hedging through use of credit default swaps;

•	Clearing transactions through central clearing houses that require daily variation margin;

•	Entering into contracts only with strong creditworthy institutions

•	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, 2017, 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 securities. For further discussion of concentration of credit risk in the investment portfolio, see the Concentration of Credit Risk section in Note 6 - Investments of Notes to Consolidated Financial Statements.

Assets and Liabilities Subject to Credit Risk

Investments Essentially all of the Company's invested assets are subject to credit risk. Credit related impairments on investments were $2 and $21, in 2017 and 2016, respectively. (See the Enterprise Risk Management section of the MD&A under “Other-Than-Temporary Impairments.”)

Reinsurance recoverables Reinsurance recoverables, net of an allowance for uncollectible reinsurance, were $4,061 and $3,659, as of December 31, 2017 and 2016, respectively. (See the Enterprise Risk Management section of the MD&A under “Reinsurance as a Risk Management Strategy.”)

Premiums receivable and agents' balances Premiums receivable and agents’ balances, net of an allowance for doubtful accounts, were $3,910 and $3,730, as of December 31, 2017 and 2016, respectively. (For a discussion regarding collectibility of these balances, see Note 1, Basis of Presentation and Significant Accounting Policies of Notes to Consolidated Financial Statements under the section labeled “Revenue Recognition.”)

Credit Risk of Derivatives

The Company uses various derivative counterparties in executing its derivative transactions. The use of counterparties creates credit risk that the counterparty may not perform in accordance with the terms of the derivative transaction.

Downgrades to the credit ratings of the Company’s insurance operating companies may have adverse implications for its use of derivatives. In some cases, downgrades may give derivative counterparties for over-the-counter 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 collateralization before entering into any new trades.

Managing the Credit Risk of Counterparties to Derivative Instruments

The Company 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, 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

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

The Hartford Financial Services Group, Inc.

Hartford, Connecticut

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of The Hartford Financial Services Group, Inc. and its subsidiaries (collectively, the "Company") as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2017, of the Company and our report dated February 23, 2018, expressed an unqualified opinion on those financial statements.

As described in Management’s Annual Report on Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting of Aetna's U.S. group life and disability business, which was acquired on November 1, 2017 and whose financial statements constitutes 2.4% of total assets and 2.2% of revenues of the consolidated financial statements of the Company as of and for the year ended December 31, 2017. Accordingly, our audit did not include the internal control over financial reporting at the acquired business.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ DELOITTE & TOUCHE LLP

Hartford, Connecticut

February 23, 2018

Part III - Item 10. Directors, and Executive Officers and Corporate Governance of the Hartford

Certain of the information called for by Item 10 will be set forth in the definitive proxy statement for the 2018 annual meeting of shareholders (the “Proxy Statement”) to be filed by The Hartford with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Form 10-K under the captions and subcaptions “Board and Governance Matters”, “Director Nominees" and "Section (16)(a) Beneficial Ownership Reporting Compliance" and is incorporated herein by reference.

The Company has adopted a Code of Ethics and Business Conduct, which is applicable to all employees of the Company, including the principal executive officer, the principal financial officer and the principal accounting officer. The Code of Ethics and Business Conduct is available on the investor relations section of the Company’s website at: http://ir.thehartford.com.

Any waiver of, or material amendment to, the Code of Ethics and Business Conduct will be posted promptly to our web site in accordance with applicable NYSE and SEC rules.

Executive Officers of The Hartford

Information about the executive officers of The Hartford who are also nominees for election as directors will be set forth in The Hartford’s Proxy Statement. Set forth below is information about the other executive officers of the Company as of February 15, 2018:

Name	Age	Position with The Hartford and Business Experience For the Past Five Years
William A. Bloom	54	Executive Vice President of Operations and Technology (August 2014 - present); President of Global Client Services, EXL (July 2010-July 2014)
Beth A. Bombara	50	Executive Vice President and Chief Financial Officer (July 2014-present); President of Talcott Resolution (July 2012-July 2014)
Kathy Bromage	60	Chief Marketing and Communications Officer (June 2015-present); Senior Vice President of Strategy and Marketing, Small Commercial and Senior Vice President of Brand Marketing (July 2012-June 2015)
James E. Davey	53	Executive Vice President and President of The Hartford Mutual Funds (2010-present)
Doug Elliot	57	President (July 2014-present); Executive Vice President and President of Commercial Lines (April 2011-July 2014)
Martha Gervasi	56	Executive Vice President, Human Resources (May 2012-present)
Brion Johnson	58	President of Talcott Resolution (July 2014-present); Executive Vice President, Chief Investment Officer (May 2012-Present)
Scott R. Lewis	55	Senior Vice President and Controller (May 2013-present); Senior Vice President and Chief Financial Officer, Personal Lines (2009-May 2013)
Robert Paiano	56	Executive Vice President and Chief Risk Officer (June 2017-Present); Senior Vice President & Treasurer (July 2010-May 2017)
David C. Robinson	52	Executive Vice President and General Counsel (June 2015-present); Senior Vice President and Director of Commercial Markets Law (August 2014-May 2015); Senior Vice President and Head of Enterprise Transformation, Strategy and Corporate Development (April 2012-August 2014)
John Wilcox	52	Chief Strategy and Ventures Officer (September 2016-present); President and Chief Operating Officer, Risk Strategies Company (June 2012-September 2016)

Part III - Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Certain of the information called for by Item 12 will be set forth in the Proxy Statement under the caption “Information on Stock Ownership” and is incorporated herein by reference.

Equity Compensation Plan Information

The following table provides information as of December 31, 2017 about the securities authorized for issuance under the Company’s equity compensation plans. The Company maintains The Hartford 2005 Incentive Stock Plan (the “2005 Stock Plan”), The Hartford 2010 Incentive Stock Plan (the “2010 Stock Plan”), The Hartford 2014 Incentive Stock Plan (the "2014 Stock Plan") (collectively the "Stock Plans") and The Hartford Employee Stock Purchase Plan (the “ESPP”). On May 21, 2014, the shareholders of

the Company approved the 2014 Stock Plan, which superseded the earlier plans. Pursuant to the provisions of the 2014 Stock Plan, no additional shares may be issued from the 2010 Stock Plan. To the extent that any awards under the 2005 Stock Plan and the 2010 Stock Plan are forfeited, terminated, surrendered, exchanged, expire unexercised or are settled in cash in lieu of stock (including to effect tax withholding) or for the issuance of a lesser number of shares than the number of shares subject to the award, the shares subject to such awards (or the relevant portion thereof) shall be available for award under the 2014 Stock Plan and such shares shall be added to the total number of shares available under the 2014 Stock Plan. For a description of the 2014 Stock Plan and the ESPP, see Note 19 - Stock Compensation Plans of Notes to Consolidated Financial Statements.

	(a)		(b)			(c)
	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights [1]		Weighted-average Exercise Price of Outstanding Options, Warrants and Rights [2]			Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) [3]
Equity compensation plans approved by stockholders	10,383,348		$	37.25		12,915,416
Equity compensation plans not approved by stockholders	—		—			—
Total	10,383,348		$	37.25		12,915,416

[1]

The amount shown in this column includes 5,212,045 outstanding options awarded under the 2005 Stock Plan and the 2010 Stock Plan. The amount shown in this column includes 4,444,226 outstanding restricted stock units and 795,044 outstanding performance shares at 100% of target (which excludes 353,087 shares that vested on December 31, 2017, related to the 2015-2017 performance period) as of December 31, 2017 under the 2010 Stock Plan and the 2014 Stock Plan. The maximum number of performance shares that could be awarded is 1,590,088 (200% of target) if the Company achieved the highest performance level. Under the 2010 and 2014 Stock Plans, no more than 500,000 shares in the aggregate can be earned by an individual employee with respect to restricted stock unit and performance share awards made in a single calendar year. As a result, the number of shares ultimately distributed to an employee with respect to awards made in the same year will be reduced, if necessary, so that the number does not exceed this limit.

[2]	The weighted-average exercise price reflects outstanding options and does not reflect outstanding restricted stock units or performance shares because they do not have exercise prices.

[3]	Of these shares, 4,517,632 remain available for purchase under the ESPP as of December 31, 2017. 8,397,784 shares remain available for issuance as options, restricted stock units, restricted stock awards or performance shares under the 2014 Stock Plan as of December 31, 2017.

Part IV. Item 15. Exhibits, Financial Statement Schedules

Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)	Documents filed as a part of this report:

(1)	Consolidated Financial Statements. See Index to Consolidated Financial Statements and Schedules elsewhere herein.

(2)	Consolidated Financial Statement Schedules. See Index to Consolidated Financial Statement and Schedules elsewhere herein.

(3)	Exhibits. See Exhibit Index elsewhere herein.

Part IV. Item 15. Exhibits, Financial Statement Schedules

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES

Description	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Statements of Operations — For the Years Ended December 31, 2017, 2016 and 2015	F-3
Consolidated Statements of Comprehensive Income (Loss) — For the Years Ended December 31, 2017, 2016 and 2015	F-4
Consolidated Balance Sheets — As of December 31, 2017 and 2016	F-5
Consolidated Statements of Changes in Stockholders’ Equity — For the Years Ended December 31, 2017, 2016 and 2015	F-6
Consolidated Statements of Cash Flows — For the Years Ended December 31, 2017, 2016 and 2015	F-7
Notes to Consolidated Financial Statements	F-8
Schedule I — Summary of Investments — Other Than Investments in Affiliates	S-1
Schedule II — Condensed Financial Information of The Hartford Financial Services Group, Inc.	S-2
Schedule III — Supplementary Insurance Information	S-4
Schedule IV — Reinsurance	S-6
Schedule V — Valuation and Qualifying Accounts	S-7
Schedule VI — Supplemental Information Concerning Property and Casualty Insurance Operations	S-8

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

The Hartford Financial Services Group, Inc.

Hartford, Connecticut

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of The Hartford Financial Services Group, Inc. and its subsidiaries (collectively, the “Company”) as of December 31, 2017 and 2016, and the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2017, and the related notes and the consolidated financial statement schedules listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 23, 2018, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ DELOITTE & TOUCHE LLP

Hartford, Connecticut

February 23, 2018

We have served as the Company’s auditor since 2002.

F-2

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

Consolidated Statements of Operations

	For the years ended December 31,
(In millions, except for per share data)	2017			2016			2015
Revenues
Earned premiums	$	14,141		$	13,697		$	13,485
Fee income	980			857			876
Net investment income	1,603			1,577			1,561
Net realized capital gains (losses):
Total other-than-temporary impairment (“OTTI”) losses	(15		)	(35		)	(47		)
OTTI losses recognized in other comprehensive income	7			8			6
Net OTTI losses recognized in earnings	(8		)	(27		)	(41		)
Other net realized capital gains (losses)	173			(83		)	29
Total net realized capital gains (losses)	165			(110		)	(12		)
Other revenues	85			86			87
Total revenues	16,974			16,107			15,997
Benefits, losses and expenses
Benefits, losses and loss adjustment expenses	10,174			9,961			9,325
Amortization of deferred policy acquisition costs ("DAC")	1,372			1,377			1,364
Insurance operating costs and other expenses	4,375			3,341			3,459
Loss on extinguishment of debt	—			—			21
Loss on reinsurance transaction	—			650			—
Interest expense	316			327			346
Amortization of other intangible assets	14			4			4
Total benefits, losses and expenses	16,251			15,660			14,519
Income from continuing operations before income taxes	723			447			1,478
Income tax expense (benefit)	985			(166		)	289
(Loss) Income from continuing operations, net of tax	(262		)	613			1,189
(Loss) income from discontinued operations, net of tax	(2,869		)	283			493
Net (loss) income	$	(3,131	)	$	896		$	1,682
(Loss) income from continuing operations, net of tax, per common share
Basic	$	(0.72	)	$	1.58		$	2.86
Diluted	$	(0.72	)	$	1.55		$	2.80
Net (loss) income per common share
Basic	$	(8.61	)	$	2.31		$	4.05
Diluted	$	(8.61	)	$	2.27		$	3.96
Cash dividends declared per common share	$	0.94		$	0.86		$	0.78

See Notes to Consolidated Financial Statements.

F-3

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

Consolidated Statements of Comprehensive Income (Loss)

	For the years ended December 31,
(In millions)	2017			2016			2015
Net (loss) income	$	(3,131	)	$	896		$	1,682
Other comprehensive income (loss):
Changes in net unrealized gain on securities	655			(3		)	(1,091		)
Changes in OTTI losses recognized in other comprehensive income	—			4			(2		)
Changes in net gain on cash flow hedging instruments	(58		)	(54		)	(20		)
Changes in foreign currency translation adjustments	28			61			(47		)
Changes in pension and other postretirement plan adjustments	375			(16		)	(97		)
OCI, net of tax	1,000			(8		)	(1,257		)
Comprehensive (loss) income	$	(2,131	)	$	888		$	425

See Notes to Consolidated Financial Statements.

F-4

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

Consolidated Balance Sheets

	As of December 31,
(In millions, except for share and per share data)	2017			2016
Assets
Investments:
Fixed maturities, available-for-sale, at fair value (amortized cost of $35,612 and $31,296)	$	36,964		$	32,182
Fixed maturities, at fair value using the fair value option	41			211
Equity securities, available-for-sale, at fair value (cost of $907 and $878)	1,012			945
Mortgage loans (net of allowances for loan losses of $1 and $0)	3,175			2,886
Limited partnerships and other alternative investments	1,588			1,527
Other investments	96			111
Sho

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