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

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

Fixed Maturities, AFS by Type


	December 31, 2021												December 31, 2020
	Amortized Cost		ACL		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Percent of Total Fair Value		Amortized Cost		ACL		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Percent of Total Fair Value
Asset-backed securities ("ABS")
Consumer loans	$	959	$	—	$	11	$	(2)	$	968	2.3	%	$	1,396	$	—	$	35	$	—	$	1,431	3.2	%
Other	166		—		2		(1)		167		0.4	%	129		—		4		—		133		0.3	%



Collateralized loan obligations ("CLOs")	3,019		—		8		(2)		3,025		7.1	%	2,780		—		7		(7)		2,780		6.2	%



Commercial Mortgage-Backed Securities ("CMBS")
Agency [1]	1,390		—		75		(5)		1,460		3.4	%	1,779		—		117		(6)		1,890		4.2	%
Bonds	2,327		—		92		(9)		2,410		5.6	%	2,160		—		159		(13)		2,306		5.1	%
Interest only	238		—		12		(1)		249		0.6	%	280		—		10		(2)		288		0.6	%
Corporate
Basic industry	761		—		34		(5)		790		1.8	%	727		—		69		(1)		795		1.8	%
Capital goods	1,442		—		84		(9)		1,517		3.5	%	1,488		—		148		(11)		1,625		3.6	%
Consumer cyclical	1,161		(1)		50		(5)		1,205		2.8	%	1,434		(1)		108		(1)		1,540		3.4	%
Consumer non-cyclical	2,473		—		134		(8)		2,599		6.1	%	2,878		—		314		(4)		3,188		7.1	%
Energy	1,405		—		99		(2)		1,502		3.5	%	1,474		(1)		147		(4)		1,616		3.6	%
Financial services	4,648		—		214		(20)		4,842		11.3	%	4,523		(21)		398		(4)		4,896		10.9	%
Tech./comm.	2,658		—		216		(11)		2,863		6.7	%	2,651		—		370		(3)		3,018		6.7	%
Transportation	744		—		43		(3)		784		1.8	%	747		—		85		(3)		829		1.8	%
Utilities	1,917		—		141		(8)		2,050		4.8	%	1,999		—		250		—		2,249		5.0	%
Other	535		—		23		(3)		555		1.3	%	480		—		37		—		517		1.1	%
Foreign govt./govt. agencies	883		—		33		(6)		910		2.1	%	842		—		77		—		919		2.0	%
Municipal bonds
Taxable	1,079		—		83		(2)		1,160		2.7	%	1,084		—		109		(1)		1,192		2.6	%
Tax-exempt	6,394		—		704		(1)		7,097		16.6	%	7,480		—		831		—		8,311		18.5	%
Residential Mortgage-Backed Securities ("RMBS")
Agency	1,337		—		44		(11)		1,370		3.2	%	1,829		—		92		(2)		1,919		4.3	%
Non-agency	2,101		—		11		(16)		2,096		4.9	%	1,755		—		41		(1)		1,795		4.0	%
Alt-A	12		—		1		—		13		—	%	27		—		2		—		29		0.1	%
Sub-prime	160		—		4		—		164		0.4	%	355		—		9		—		364		0.8	%
U.S. Treasuries	2,979		—		86		(14)		3,051		7.1	%	1,264		—		141		—		1,405		3.1	%
Total fixed maturities, AFS	$	40,788	$	(1)	$	2,204	$	(144)	$	42,847	100.0	%	$	41,561	$	(23)	$	3,560	$	(63)	$	45,035	100.0	%
Fixed maturities, FVO [2]									$	160											$	—

*[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..

*[2]*Included within other investments on the Consolidated Balance Sheets.

The fair value of fixed maturities, AFS decreased as compared with December 31, 2020, primarily due to a decrease in valuations due to higher interest rates, partially offset by tighter

credit spreads. The decline was also due to the reinvestment into other asset classes.The Company primarily decreased holdings of tax-exempt municipal bonds, agency and sub-prime


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RMBS, consumer cyclical and non-cyclical corporate bonds, consumer loans, and agency CMBS, while primarily increasing holdings in U.S. treasuries, non-agency RMBS, CLOs, and CMBS bonds.

Commercial & Residential Real Estate

The following table presents the Company’s exposure to CMBS and RMBS by credit quality included in the preceding Fixed Maturities, AFS by Type table.

Exposure to CMBS and RMBS as of December 31, 2021


	AAA				AA				A				BBB				BB and Below				Total
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
CMBS
Agency [1]	$	1,380	$	1,450	$	10	$	10	$	—	$	—	$	—	$	—	$	—	$	—	$	1,390	$	1,460
Bonds	950		995		571		593		439		453		182		186		185		183		2,327		2,410
Interest Only	134		141		92		96		1		1		10		10		1		1		238		249
Total CMBS	2,464		2,586		673		699		440		454		192		196		186		184		3,955		4,119
RMBS
Agency	1,315		1,347		22		23		—		—		—		—		—		—		1,337		1,370
Non-Agency	840		845		554		552		477		473		199		196		31		30		2,101		2,096
Alt-A	—		—		—		—		—		—		—		—		12		13		12		13
Sub-Prime	6		7		34		35		47		48		24		24		49		50		160		164
Total RMBS	2,161		2,199		610		610		524		521		223		220		92		93		3,610		3,643
Total CMBS & RMBS	$	4,625	$	4,785	$	1,283	$	1,309	$	964	$	975	$	415	$	416	$	278	$	277	$	7,565	$	7,762

Exposure to CMBS and RMBS as of December 31, 2020


	AAA				AA				A				BBB				BB and Below				Total
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
CMBS
Agency [1]	$	1,771	$	1,882	$	8	$	8	$	—	$	—	$	—	$	—	$	—	$	—	$	1,779	$	1,890
Bonds	1,009		1,101		541		582		423		430		170		179		17		14		2,160		2,306
Interest Only	177		183		90		93		8		7		4		4		1		1		280		288
Total CMBS	2,957		3,166		639		683		431		437		174		183		18		15		4,219		4,484
RMBS
Agency	1,807		1,894		22		25		—		—		—		—		—		—		1,829		1,919
Non-Agency	1,034		1,063		371		380		313		315		36		36		1		1		1,755		1,795
Alt-A	—		—		3		3		2		2		2		2		20		22		27		29
Sub-Prime	1		1		25		26		114		116		102		105		113		116		355		364
Total RMBS	2,842		2,958		421		434		429		433		140		143		134		139		3,966		4,107
Total CMBS & RMBS	$	5,799	$	6,124	$	1,060	$	1,117	$	860	$	870	$	314	$	326	$	152	$	154	$	8,185	$	8,591

[1]Includes securities with pools of loans issued by the Small Business Administration which are backed by the full faith and credit of the U.S. government.

The Company also has exposure to commercial mortgage loans. These loans are collateralized by real estate properties that are diversified both geographically throughout the United States and by property type. These commercial loans are originated by the Company as high quality whole loans, and the Company may sell participation interests in one or more loans to third parties. A loan participation interest represents a pro-rata share in interest and principal payments generated by the participated loan, and the relationship between the Company as loan originator, lead participant and servicer and the third party

as a participant are governed by a participation agreement.

As of December 31, 2021, mortgage loans had an amortized cost of $5.4 billion and carrying value of $5.4 billion, with an ACL of $29. As of December 31, 2020, mortgage loans had an amortized cost of $4.5 billion and carrying value of $4.5 billion, with an ACL of $38. The decrease in the allowance is primarily attributable to improved economic scenarios, partially offset by an increase driven by net additions of new loans.


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The Company funded $1.3 billion of commercial mortgage loans with a weighted average loan-to-value (“LTV”) ratio of 57% and a weighted average yield of 2.9% during the twelve months ended December 31, 2021. The Company continues to originate commercial mortgage loans in high growth markets across the country focusing primarily on institutional-quality industrial, multi-family, and retail properties with strong LTV ratios. There were no mortgage loans held for sale as of December 31, 2021 or December 31, 2020.

Municipal Bonds

The following table presents the Company’s exposure to municipal bonds by type and weighted average credit quality included in the preceding Securities by Type table.

Available For Sale Investments in Municipal Bonds


	December 31, 2021					December 31, 2020
	Amortized Cost		Fair Value		Weighted Average Credit Quality	Amortized Cost		Fair Value		Weighted Average Credit Quality
General Obligation	$	910	$	1,031	AA+	$	1,082	$	1,232	AA+
Pre-refunded [1]	487		519		AAA	889		940		AAA
Revenue
Transportation	1,404		1,579		A+	1,441		1,636		A+
Health Care	1,274		1,397		A+	1,273		1,407		A+
Leasing [2]	813		874		AA-	905		985		AA-
Education	670		748		AA	732		824		AA
Water & Sewer	504		538		AA	644		694		AA
Sales Tax	370		436		AA	394		464		AA
Power	317		357		A+	401		450		A+
Housing	98		103		AA	102		109		AA+
Other	626		675		AA-	701		762		A+
Total Revenue	6,076		6,707		AA-	6,593		7,331		AA-
Total Municipal	$	7,473	$	8,257	AA-	$	8,564	$	9,503	AA-

*[1]*Pre-refunded bonds are bonds for which an irrevocable trust containing sufficient U.S. treasury, agency, or other securities has been established to fund the remaining payments of principal and interest.

*[2]*Leasing revenue bonds are generally the obligations of a financing authority established by the municipality that leases facilities back to a municipality. The notes are typically secured by lease payments made by the municipality that is leasing the facilities financed by the issue. Lease payments may be subject to annual appropriation by the municipality or the municipality may be obligated to appropriate general tax revenues to make lease payments.

As of December 31, 2021, the largest issuer concentrations were the New York State Dormitory Authority, the State of California, and the Pennsylvania State Turnpike Commission, which each comprised less than 3% of the municipal bond portfolio and were primarily comprised of general obligation and revenue bonds. As of December 31, 2020, the largest issuer concentrations were the New York State Dormitory Authority, the Commonwealth of Massachusetts, and the New York City Municipal Water Finance Authority, which each comprised less than 3% of the municipal bond portfolio and were primarily comprised of general obligation and revenue bonds. In total, municipal bonds make up 14% of the fair value of the Company's investment portfolio. While COVID-19 has had an impact on many municipal issuers, credit fundamentals in this sector have broadly stabilized due to an unprecedented influx of federal relief funds and a strong economic recovery.

Limited Partnerships and Other Alternative Investments

The following table presents the Company’s investments in limited partnerships and other alternative investments which include hedge funds, real estate funds, and private equity funds. Real estate funds consist of investments primarily in real estate joint ventures and, to a lesser extent, equity funds. 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.


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

Limited Partnerships and Other Alternative Investments - Net Investment Income


	Year Ended December 31,
		2021			2020				2019
			Amount		Yield [1]		Amount		Yield [1]		Amount		Yield [1]
Hedge funds			$	33	17.7	%	$	9	7.1	%	$	5	7.2	%
Real estate funds			149		18.4	%	85		20.3	%	70		17.0	%
Private equity funds			456		51.3	%	106		12.4	%	126		16.6	%
Other alternative investments [2]			94		22.6	%	22		5.4	%	31		8.2	%
Total			$	732	31.8	%	$	222	12.3	%	$	232	14.4	%

*[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 fixed income, private equity, and hedge funds.

Investments in Limited Partnerships and Other Alternative Investments


	December 31, 2021				December 31, 2020
	Amount		Percent		Amount		Percent
Hedge funds	$	274	8.2	%	$	158	7.6	%
Real estate funds	1,315		39.2	%	563		27.0	%
Private equity and other funds	1,256		37.5	%	944		45.4	%
Other alternative investments [1]	508		15.1	%	417		20.0	%
Total	$	3,353	100.0	%	$	2,082	100.0	%

*[1]*Consists of an insurer-owned life insurance policy which is primarily invested in fixed income, private equity, and hedge funds.

Fixed Maturities, AFS — Unrealized Loss Aging

The total gross unrealized losses were $144 as of December 31, 2021, and have increased $81 from December 31, 2020, primarily due to higher interest rates, partially offset by tighter credit spreads. As of December 31, 2021, $141 of the gross unrealized losses were associated with fixed maturities, AFS depressed less than 20% of amortized cost. The remaining $3 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 commercial real estate securities that were purchased at tighter credit spreads.

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, 2021									December 31, 2020
Consecutive Months	Items	Amortized Cost		ACL		Unrealized Loss		Fair Value		Items	Amortized Cost		ACL		Unrealized Loss		Fair Value
Three months or less	640	$	6,193	$	—	$	(32)	$	6,161	102	$	625	$	—	$	(3)	$	622
Greater than three to six months	404	3,249		—		(55)		3,194		46	367		—		(5)		362
Greater than six to nine months	101	571		—		(5)		566		8	6		—		(1)		5
Greater than nine to eleven months	171	1,041		—		(29)		1,012		186	1,275		(1)		(27)		1,247
Twelve months or more	184	631		—		(23)		608		205	994		—		(27)		967
Total	1,500	$	11,685	$	—	$	(144)	$	11,541	547	$	3,267	$	(1)	$	(63)	$	3,203


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Unrealized Loss Aging for Fixed Maturities, AFS Continuously Depressed Over 20%


	December 31, 2021							December 31, 2020
Consecutive Months	Items	Amortized Cost		Unrealized Loss		Fair Value		Items	Amortized Cost		Unrealized Loss		Fair Value
Three months or less	—	$	—	$	—	$	—	2	$	2	$	(1)	$	1

Greater than six to nine months	—	—		—		—		1	46		(10)		36
Greater than nine to eleven months	—	—		—		—		2	5		(1)		4
Twelve months or more	20	5		(3)		2		24	5		(2)		3
Total	20	$	5	$	(3)	$	2	29	$	58	$	(14)	$	44

Credit Losses on Fixed Maturities, AFS and Intent-to-Sell Impairments

For the year ended December 31, 2021

The Company recorded a net decrease in the ACL of $4, driven by increases in the fair value of corporate issuers that had an ACL in prior periods, partially offset by credit losses on a media/entertainment company. Unrealized losses on securities with an ACL recognized in other comprehensive income were less than $1. For further information, refer to Note 6 - 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, 2020

The Company recorded net credit losses on fixed maturities, AFS of $28. The losses were primarily attributable to corporate fixed maturities, mainly one private regional and commercial aircraft lessor and to a lesser extent, one tax-exempt municipal bond impacted by COVID-19. Unrealized losses on securities with ACL recognized in other comprehensive income were $1.

Intent-to-sell impairments of $5 were primarily related to one corporate issuer in the energy sector and one issuer with exposure to India.

ACL on Mortgage Loans

For the year ended December 31, 2021

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 6 - Investments of Notes to Consolidated Financial Statements.

The Company recorded a decrease in the ACL on mortgage loans of $9. The decrease was primarily the result of improved economic scenarios, partially offset by an increase driven by net additions of new loans. The Company did not record an ACL on any individual mortgage loans.

For the year ended December 31, 2020

The Company recorded an increase in the ACL on mortgage loans of $19. The increase in the allowance was due to the effects of the COVID-19 pandemic and its impacts on the economic forecasts, as well as lower estimated property values and operating income. The Company did not record an ACL on any individual mortgage loans.

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, 2021:

$1.9 billion in fixed maturities, short-term investments, investment sales receivable and cash at the HFSG Holding Company.
A senior unsecured revolving credit facility that provides for borrowing capacity up to $750 of unsecured credit through October 27, 2026. As of December 31, 2021, there were no borrowings outstanding.
An intercompany liquidity agreement that allows for short-term advances of funds among the HFSG Holding Company and certain affiliates of up to $2.0 billion for liquidity and other general corporate purposes. As of December 31, 2021, there were no borrowings outstanding.


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

2022 expected dividends and other sources of capital:

The future payment of dividends from our subsidiaries is dependent on several factors including the extent to which COVID-19 impacts our business, results of operations, financial condition and liquidity

P&C -** The Company's U.S. property and casualty insurance subsidiaries have dividend capacity of $2.0 billion for 2022, with $1.3 to $1.4 billion of net dividends expected in 2022.
Group Benefits -** HLA has dividend capacity of $241 in 2022 with $175 to $200 of dividends expected in 2022.
Hartford Funds** - HFSG Holding Company expects to receive $175 to $200 in dividends from Hartford Funds in 2022.

Expected liquidity requirements for the next twelve months as of December 31, 2021:

$210 of interest on debt;
$21 dividends on preferred stock, subject to the discretion of the Board of Directors;
$525 of common stockholders' dividends, subject to the discretion of the Board of Directors and before share repurchases; and
$600 of 7.875% junior subordinated debentures expected to be called at par in April of 2022.

Expected liquidity requirements for beyond the next twelve months as of December 31, 2021:

Interest on debt and debt repayments, see Note 14 - 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:

Authorization for equity repurchases of up to $3.0 billion effective through December 31, 2022. Under the program, the Company repurchased 25.9 million shares during the period from January 1, 2021 to December 31, 2021 for $1.7 billion with $1.3 billion of authorization remaining as of December 31, 2021.

|LIQUIDITY REQUIREMENTS AND SOURCES OF CAPITAL

The Hartford Financial Services Group, Inc. ("HFSG Holding Company")

The liquidity requirements of the holding company of The Hartford Financial Services Group, Inc. will primarily be met by HFSG Holding Company’s fixed maturities; short-term investments and cash; and dividends from its subsidiaries, principally its insurance operations.

The Company maintains sufficient liquidity and has a variety of contingent liquidity resources to manage liquidity across a range of economic scenarios. We continue to expect to successfully manage our liquidity throughout the pandemic.

The HFSG Holding Company expects to continue to receive dividends from its operating subsidiaries in the future and manages capital in its operating subsidiaries to be sufficient under significant economic stress scenarios. Dividends from subsidiaries and other sources of funds at the holding company 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.

Debt

On September 21, 2021, The Hartford issued $600 of 2.9% senior notes (“2.9% Notes”) due September 15, 2051 for net proceeds of approximately $588, after deducting underwriting discounts and expenses from the offering. Interest is payable semi-annually in arrears on March 15 and September 15, commencing March 15, 2022. The Hartford, at its option, can redeem the 2.9% Notes at any time, in whole or part, at a redemption price equal to the greater of 100% of the principal amount being redeemed or a make-whole amount based on a comparable maturity US Treasury plus 20 basis points, plus any accrued and unpaid interest, except the 2.9% Notes may be redeemed at par within six months of maturity. The Hartford intends to use the net proceeds along with other available resources to repay The Hartford's $600 7.875% junior subordinated debentures (“7.875% Notes”), which are redeemable at par on or after April 15, 2022. The Hartford expects to recognize a loss on extinguishment of debt of $9, before tax, on redemption.

On March 30, 2020, The Hartford repaid at maturity the $500 principal amount of its 5.5% senior notes.

For additional information on Debt, see Note 14 - Debt of Notes to Consolidated Financial Statements.


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|Equity

In December 2020, the Company announced a $1.5 billion share repurchase authorization by the Board of Directors which is effective from January 1, 2021 through December 31, 2022. The authorization was increased by the Board of Directors to $2.5 billion in April 2021 and then further increased to $3.0 billion in October 2021. During the period from January 1, 2022 through February 17, 2022, the Company repurchased 3.8 million shares for $274 and has $1.0 billion of authorization remaining as of February 17, 2022. The timing of any future repurchases will be dependent upon 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.

Under The Hartford's previous $1.0 billion share repurchase program authorized by its Board of Directors in February 2019 and which expired on December 31, 2020, the Company repurchased 2.7 million and 3.4 million shares for $150 and $200 during the years ended 2020 and 2019, respectively.

For further information, see Note 16 - Equity of Notes to Consolidated Financial Statements.

|DIVIDENDS

The Hartford's Board of Directors declared the following quarterly dividends since October 1, 2021:

Common Stock Dividends


Declared	Record	Payable	Amount per share

October 28, 2021	December 1, 2021	January 4, 2022	$	0.385
February 16, 2022	March 1, 2022	April 4, 2022	$	0.385

Preferred Stock Dividends


Declared	Record	Payable	Amount per share



December 15, 2021	February 1, 2022	February 15, 2022	$	375.00
February 16, 2022	May 2, 2022	May 16, 2022	$	375.00

There are no current restrictions on HFSG Holding Company's ability to pay dividends to its stockholders.

For a discussion of restrictions on dividends to HFSG Holding Company from its insurance subsidiaries, see the following "Dividends from Subsidiaries" discussion. For a discussion of potential restrictions on the HFSG Holding Company's ability to pay dividends, see 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 HFSG 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 Navigators Insurance Company ("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 of the subsidiaries, regulatory capital requirements and liquidity requirements of the individual operating company.

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 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 2021, HFSG Holding Company received $295 of dividends from HLA and $165 from Hartford Funds. In addition, HFSG Holding Company received $1.1 billion of net dividends from P&C subsidiaries in 2021 which excludes $150 of P&C dividends that were subsequently contributed to P&C subsidiaries and $50 of P&C dividends related to interest


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payments on an intercompany note owed by Hartford Holdings, Inc. ("HHI") to Hartford Fire Insurance Company.

|OTHER SOURCES OF CAPITAL FOR THE HFSG HOLDING COMPANY

The Hartford endeavors to maintain a capital structure that provides financial and operational flexibility to its insurance subsidiaries, ratings that support its competitive position in the financial services marketplace (see the "Ratings" section below for further discussion), and stockholder returns. As a result, the Company may from time to time raise capital from the issuance of debt, common equity, preferred stock, equity-related debt or other capital securities and is continuously evaluating strategic opportunities. The issuance of debt, common equity, equity-related debt or other capital securities could result in the dilution of stockholder interests or reduced net income to common stockholders due to additional interest expense or preferred stock dividends.

Shelf Registrations

The Hartford filed an automatic shelf registration statement with the Securities and Exchange Commission ("the SEC") on May 17, 2019 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 14 - Debt of Notes to Consolidated Financial Statements.

Revolving Credit Facility

In 2018, The Hartford entered into a senior unsecured revolving credit facility (the "Credit Facility") that provides up to $750 of unsecured credit with an expiration date of March 29, 2023. On October 27, 2021, The Hartford amended and restated the Credit Facility and extended it through October 27, 2026. As of December 31, 2021, 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 14– 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 HFSG Holding Company and certain affiliates of up to $2.0 billion for liquidity and other general corporate purposes. The Connecticut Department of Insurance ("CTDOI") granted approval for certain affiliated insurance companies that are parties to the agreement to treat receivables from a parent, including the HFSG Holding Company, as admitted assets for statutory accounting purposes.

As of December 31, 2021, there were no amounts outstanding at the HFSG Holding Company.

Collateralized Advances with Federal Home Loan Bank of Boston

The Company’s subsidiaries, Hartford Fire Insurance Company (“Hartford Fire”) and Hartford Life and Accident Insurance Company ("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. As of December 31, 2021, there were no advances outstanding. The CTDOI permits Hartford Fire and HLA to pledge up to $1.3 billion and $0.6 billion in qualifying assets, respectively, without prior approval, to secure FHLBB advances in 2022. For further information regarding the Company's collateralized advances with Federal Home Loan Bank of Boston, see Note 14 - Debt of Notes to Consolidated Financial Statements.

Lloyd's Letter of Credit Facilities

The Hartford has entered into a committed credit facility agreement with a syndicate of lenders (the "Club Facility") as well as a non-committed $25 credit facility with a lender (the "Bilateral Facility"). The Club Facility has two tranches with one tranche extending a $104 commitment and the other tranche extending a £85 million ($115 as of December 31, 2021) commitment. As of December 31, 2021, letters of credit with an aggregate face amount of $104 and £68 million, or $92, were outstanding under the Club Facility and no letters of credit were outstanding under the Bilateral Facility.

Among other covenants, the Club Facility and Bilateral Facility contain financial covenants regarding The Hartford's consolidated net worth and financial leverage and that limit the amount of letters of credit that can support Funds and Lloyd's, consistent with Lloyd's requirements. As of December 31, 2021, The Hartford was in compliance with all financial covenants of both facilities.

For further information regarding the Club Facility and the Bilateral Facility, see Note 14– Debt of Notes to Consolidated Financial Statements.

Other Sources and Uses of Capital

As part of the sale of the former retained interest in Talcott Resolution, which was completed on June 30, 2021, the Company received $217 of proceeds.

In May 2021, the Company contributed €15 million ($18) to Navigators Holdings (Europe) N.V., a Belgium holding company. On December 29, 2021, the Company received approximately $20, before $9 of transaction costs, related to the sale of its Continental Europe Operations.

|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 2021, and made contributions to this pension plan of approximately $70 in both 2020 and 2019. No contributions


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were made to the other postretirement plans in 2021, 2020 and 2019. The Company’s 2021, 2020 and 2019 required minimum funding contributions were immaterial. The Company does not have a 2022 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 2022. The Company will monitor the funded status of the U.S. qualified defined benefit pension plan during 2022 to make this determination. As of December 31, 2021, 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 19 - 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 15 - Commitments and Contingencies of Notes to Consolidated Financial Statements.

As of December 31, 2021, 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. For information about the impact of COVID-19 on the Company's cash flows see Part I, Item 1A, Risk Factors of this Annual Report on Form 10-K.

The principal sources of operating funds are premiums, fees earned from insurance and administrative service agreements, and investment income, while investing cash flows primarily originate from maturities and sales of invested assets.

The Company’s insurance operations consist of property and casualty insurance products (collectively referred to as “Property & Casualty Operations”) and Group Benefits.

The Company's insurance operations hold fixed maturity securities including a significant short-term investment position (securities with maturities of one year or less at the time of purchase) to meet liquidity needs. Liquidity requirements that are unable to be funded by the Company's insurance operations' short-term investments would be satisfied with current operating funds, including premiums or investing cash flows, which includes proceeds received through the sale of invested assets. A sale of invested assets could result in significant realized losses.

The following tables represent the fixed maturity holdings, including the aforementioned cash and short-term investments available to meet liquidity needs, for each of the Company’s insurance operations.

Property & Casualty


	As of
	December 31, 2021
Fixed maturities	$	33,143
Short-term investments	1,332
Cash	176
Less: Derivative collateral	36
Total	$	34,615

Property & Casualty operations invested assets also include $1.4 billion in equity securities, $3.9 billion in mortgage loans and $2.7 billion in limited partnerships and other alternative investments.

Group Benefits Operations


	As of
	December 31, 2021
Fixed maturities	$	9,487
Short-term investments	352
Cash	15
Less: Derivative collateral	18
Total	$	9,836

Group Benefits operations invested assets also include $338 in equity securities, $1.5 billion in mortgage loans and $664 in limited partnerships and other alternative investments.

The primary uses of funds are to pay claims, claim adjustment expenses, commissions and other underwriting and insurance operating costs, to pay taxes, to purchase new investments and to make dividend payments to the HFSG Holding Company.

Property & Casualty reserves for unpaid losses and loss adjustment expenses as of December 31, 2021 were $31.4 billion. Reserves for Property & Casualty unpaid losses and loss adjustment expenses include case reserves and IBNR. The ultimate amount to be paid to settle both case reserves and IBNR is an estimate, subject to significant uncertainty. The actual amount to be paid is not finally determined until the Company reaches a settlement with the claimant. Final claim settlements may vary significantly from the present estimates, particularly since many claims will not be settled until well into the future. For a discussion of The Hartford’s judgment in estimating reserves for Property & Casualty see Part II, Item 7, MD&A - Critical Accounting Estimates, Property & Casualty Insurance Product Reserves, and for historical payments by reserve line net of reinsurance, see Note 12 – Reserve for Unpaid Losses and Loss 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 unanticipated settlements. In particular, there is significant uncertainty over the claim payment patterns of asbestos and environmental claims.


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Group Benefits reserves as of December 31, 2021 were $9.0 billion. Estimated group life and disability obligations are based on assumptions comparable with the Company’s historical experience, modified for recent observed trends. For a discussion of The Hartford’s judgment in estimating reserves for Group Benefits see Part II, Item 7, MD&A - Critical Accounting Estimates, Group Benefit LTD Reserves, Net of Reinsurance, for further discussion on future policy benefits, see Note 13 Reserve for Future Policy Benefits and for historical payments by reserve line, net of reinsurance, see Note 12 – 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 includes retained reserves of $458 as of December 31, 2021 related to retained run-off liabilities of its former life and annuity business. For further discussion on future policy benefits, see Note 13 Reserve for Future Policy Benefits.

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, 2021, Hartford Funds cash and short-term investments were $254.

|PURCHASE AND OTHER OBLIGATIONS

The Hartford’s unfunded commitments to purchase investments in limited partnerships and other alternative investments, private placements, and mortgage loans are disclosed in Note 15 - 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 21 - 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, 2021			December 31, 2020			Change


Long-term debt	$	4,944		$	4,352		14%
Total debt	4,944			4,352			14%
Common stockholders' equity, excluding AOCI, net of tax	17,337			17,052			2%
Preferred stock	334			334			—%
AOCI, net of tax	172			1,170			(85)%
Total stockholders’ equity	$	17,843		$	18,556		(4%)
Total capitalization	$	22,787		$	22,908		(1%)
Debt to stockholders’ equity	28		%	23		%
Debt to capitalization	22		%	19		%

Total capitalization decreased $121, or 1%, as of December 31, 2021 compared to December 31, 2020 primarily due to share repurchases in the period and a decrease in AOCI, partially offset by net income in excess of stockholder dividends and an increase in long-term debt due to the issuance of the 2.9% Notes.

For additional information on AOCI, net of tax, including unrealized gains from securities, see Note 18 - Changes in and Reclassifications From Accumulated Other Comprehensive Income and Note 6 - Investments of Notes to Consolidated Financial Statements. For additional information on debt, see Note 14 - Debt of Notes to Consolidated Financial Statements.


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|CASH FLOW[1]


	2021		2020		2019
Net cash provided by operating activities	$	4,093	$	3,871	$	3,489
Net cash used for investing activities	$	(2,466)	$	(2,066)	$	(2,148)
Net cash used for financing activities	$	(1,581)	$	(1,778)	$	(1,191)
Cash and restricted cash— end of year	$	337	$	239	$	262

*[1]*Cash activities in 2021 and 2020 include cash flows related to Continental Europe Operations classified as held for sale beginning in the third quarter of 2020 and sold on December 29, 2021. See Note 22 - Business Dispositions of Notes to Consolidated Financial Statements for discussion of this transaction.

Year ended December 31, 2021 compared to the year ended December 31, 2020

Net cash provided by operating activities increased in 2021 as compared to the prior year period primarily driven by an increase in Commercial Lines and Group Benefits premiums received, greater cash distributions from limited partnerships, lower payroll and employee related expenditures, a decrease in restructuring costs and the impact of Personal Lines premium refunds in the 2020 period. Positive cash flow impacts were partially offset by an increase in income taxes paid and an increase in Group Benefits loss and loss adjustment expenses paid.

Cash used for investing activities increased in 2021 as compared to the prior year as a result of a decrease from net proceeds to net payments for equity securities, an increase in net payments for partnerships, an increase in net payments for mortgage loans, an increase in net payments for other investing activities and a decrease from net proceeds to net payments for derivatives, partially offset by an increase from net payments to net proceeds for fixed maturities and consideration received from the sale of the Company's equity interest in Talcott Resolution.

Cash used for financing activities decreased primarily due to proceeds from the issuance of debt in 2021, debt repayments in the 2020 period, and a decrease in cash used for securities lending transactions, partially offset by an increase in share repurchases in 2021.

Operating cash flows for the year ended December 31, 2021 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 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.

On July 21, 2021, Moody's upgraded the insurance financial strength rating of HLA to A1 from A2. The upgrade reflects HLA’s leading market position in the group life and disability business, its distribution capabilities and consistent profitability, as well as implicit support from The Hartford.

Insurance Financial Strength Ratings as of February 17, 2022


	A.M. Best	Standard & Poor's	Moody's
Hartford Fire Insurance Company	A+	A+	A1
Hartford Life and Accident Insurance Company	A+	A+	A1
Navigators Insurance Company	A+	A	Not Rated
Other Ratings:
The Hartford Financial Services Group, Inc.:
Senior debt	a-	BBB+	Baa1

These ratings are not a recommendation to buy, sell or hold any of The Hartford’s securities and they may be revised or withdrawn at any time at the discretion of the rating organization. Each agency’s rating should be evaluated independently of any other agency’s rating. The system and the number of rating categories can vary across rating agencies.

Among other factors, rating agencies consider the level of statutory capital and surplus of our U.S. insurance subsidiaries as well as the level of a measure of GAAP capital held by the Company in determining the Company's financial strength and credit ratings. Rating agencies may implement changes to their capital formulas that have the effect of increasing the amount of capital we must hold in order to maintain our current ratings. See 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.”


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|STATUTORY CAPITAL


U.S. Statutory Capital Rollforward for the Company's Insurance Subsidiaries
	Property and Casualty Insurance Subsidiaries [1] [2]		Group Benefits Insurance Subsidiary		Total
U.S. statutory capital at January 1, 2021	$	10,795	$	2,601	$	13,396
Statutory income	1,774		32		1,806
Dividends to parent	(1,105)		(295)		(1,400)
Other items	450		72		522
Net change to U.S. statutory capital	1,119		(191)		928
U.S. statutory capital at December 31, 2021	$	11,914	$	2,410	$	14,324

*[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. and Continental Europe.

Stat to 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 Group Benefits reserves (i.e. for Group 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, caused by changes in interest rates, 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 Navigators and A&E ADC agreements is recognized within a special category of surplus under U.S. STAT but is recognized within other liabilities under U.S. GAAP.

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


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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 contingencies related to The Hartford’s legal proceedings, see the information contained under “Litigation” and “Run-off Asbestos and Environmental Claims,” in Note 15 - 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

COVID-19 Global Pandemic

State and federal lawmakers continue to propose legislation and regulation to address the effects of the COVID-19 pandemic and to promote recovery from the pandemic. There have been proposals to impose retroactive coverage of COVID-19 claims under existing business interruption coverage provisions. If such proposals were enacted, they could represent a material exposure for the Company. Further, some states have adopted, or are considering incorporating, a presumption that if certain workers become infected with COVID-19, such infection would constitute an occupational disease triggering workers’ compensation coverage. In addition, state insurance regulators, including California, New Jersey and New York, have encouraged (and in some cases required) insurers to offer immediate relief to policyholders. As the COVID-19 global pandemic continues, regulators may require us or we may elect to provide additional consumer and/or business financial relief. We may also see this manifest in the review and approval of new rate filings, with regulators applying heightened scrutiny even when rate reductions are proposed. The duration and scope of such regulatory/Company actions are uncertain, and

the impacts of such actions could adversely affect the Company’s insurance business.

Proposals have been introduced in Congress to enact a pandemic risk insurance coverage through a risk sharing mechanism between insurers and the federal government for future pandemics. Timing for any Congressional action with respect to these proposals is uncertain at this time. If such a program were to be enacted, it could represent a significant obligation for the Company in terms of deductible and co-share obligations.

Biden Administration Build Back Better Agenda

During 2021, the Biden Administration called for Congressional action on the President’s Build Back Better Agenda, which outlined funding across traditional infrastructure and human infrastructure in the U.S.

On November 15, 2021, President Biden signed the bipartisan “Infrastructure Investment and Jobs Act” into law, which provided funding for traditional infrastructure such as roads, bridges and highways.

The second phase of Build Back Better proposes funding for a national paid family and medical leave program, clean energy initiatives, affordable childcare and more in the Build Back Better Act.

Notably, a national paid family and medical leave program could affect existing state-based disability and paid leave programs or other products and services that the Company provides through its Group Benefits business.

If enacted, the effect of new proposals from the Build Back Better agenda on the Company’s operations, including the ability to attract new business and retain existing customers is unclear. While Congress is considering partisan action on the Build Back Better agenda, the nature and timing of such action is unclear.

Patient Protection and Affordable Care Act of 2010 (the "Affordable Care Act")

It is unclear whether the Administration, Congress or the courts will seek to reverse, amend or alter the ongoing operation of the Affordable Care Act ("ACA"). If such actions were to occur, they might have an impact on various aspects of our businesses, including our insurance businesses. The Hartford’s core business does not involve the issuance of health insurance, and we have not observed any material impacts on the Company’s workers’ compensation business or group benefits business from the ACA. We will continue to monitor the impact of the ACA and any reforms on consumer, broker and medical provider behavior for leading indicators of changes in medical costs or loss payments primarily on the Company's workers' compensation and disability liabilities. The potential effect on The Hartford as an employer would be consistent with other large employers.


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US Tax Reform

As Congress debates action on various spending initiatives, it may consider a variety of proposals to fund the cost of new spending with revenue raising measures. Proposals from the Build Back Better agenda, as well as the Biden Administration commitment to the OECD global minimum tax, could be drivers of tax policy changes, including a possible increase in the corporate tax rate, creation of a corporate minimum tax and other changes to taxes owed on income earned outside of the U.S. These and other 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 Congressional or regulatory action with respect to any such efforts is unclear.

Post-Brexit UK Regulatory Reforms

The UK Prudential Regulation Authority (“PRA”) is reviewing the Solvency II regime, introduced across the EU during 2016 to

align insurance entities’ risk frameworks for managing capital adequacy and risk management practices, as well as increased transparency and enhanced regulatory supervision.

The PRA also recognizes that climate change presents a material financial risk to insurers and the financial system and for 2022 the PRA will incorporate the financial risks posed by supervision into its core supervisory approach.

Guaranty Fund and Other Insurance-related Assessments

For a discussion regarding Guaranty Fund and Other Insurance-related Assessments, see Note 15 - 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.


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ACRONYMS


A&E Asbestos and Environmental			HIMCO Hartford Investment Management Company
ABS Asset Backed Securities			IBNR Incurred But Not Reported
ACL Allowance for Credit Losses			IT Information Technology
ADC Adverse Development Cover			LCL Liability for Credit Losses
AFS Available-For-Sale			LIBOR London Inter-Bank Offered Rate
ALAE Allocated Loss Adjustment Expenses			LTD Long-Term Disability
AOCI Accumulated Other Comprehensive Income			LTV Loan-to-Value
AUM Assets Under Management			MD&A Management's Discussion and Analysis of Financial Conditions and Results of Operations
CAY Current Accident Year			NAIC National Association of Insurance Commissioners
CLO Collateralized Loan Obligation			NIC Navigators Insurance Company
CMBS Commercial Mortgage-Backed Securities			NICO National Indemnity Company, a subsidiary of Berkshire Hathaway Inc. (“Berkshire”)
DAC Deferred Policy Acquisition Costs			NM Not Meaningful
DEI Diversity, Equity and Inclusion			NOLs Net Operating Loss Carryforwards or Carrybacks
DLR Disabled Life Reserve			NSIC Navigators Specialty Insurance Company
DSCR Debt Service Coverage Ratio			OCI Other Comprehensive Income
ERCC Enterprise Risk and Capital Committee			OTC Over-the-Counter
ESPP The Hartford Employee Stock Purchase Plan			P&C Property and Casualty
ETF Exchange-Traded Funds			PG&E PG&E Corporation and Pacific Gas and Electric Company
ETP Exchange-Traded Products			PYD Prior Year Development
FAL Funds at Lloyd's			RBC Risk-Based Capital
FASB Financial Accounting Standards Board			RMBS Residential Mortgage-Backed Securities
FHLBB Federal Home Loan Bank of Boston			ROA Return on Assets
GAAP Generally Accepted Accounting Principles			ROE Return on Equity
GB Group Benefits			SCR Solvency Capital Requirement

HFSG Hartford Financial Services Group, Inc.			SOFR Secured Overnight Funding Rate
HHI Hartford Holdings, Inc.			ULAE Unallocated Loss Adjustment Expenses


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Part II - Item 9A. Controls and Procedures


Item 9A.

CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

The Company's principal executive officer and its principal financial officer, based on their evaluation of the Company's disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) have concluded that the Company's disclosure controls and procedures are effective for the purposes set forth in the definition thereof in Exchange Act Rule 13a-15(e) as of December 31, 2021.

MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of The Hartford Financial Services Group, Inc. and its subsidiaries (“The Hartford”) is responsible for establishing and maintaining adequate internal control over financial reporting for The Hartford as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934.

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 accounting principles generally accepted in the United States. A company's internal control over financial reporting includes 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 accounting principles generally accepted in the United States, 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.

The Hartford's management assessed its internal controls over financial reporting as of December 31, 2021 in relation to criteria for effective internal control over financial reporting described in “Internal Control-Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment under those criteria, The Hartford's management concluded that its internal control over financial reporting was effective as of December 31, 2021.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes in the Company's internal control over financial reporting that occurred during the Company's fourth fiscal quarter of 2021 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

ATTESTATION REPORT OF THE COMPANY'S REGISTERED PUBLIC ACCOUNTING FIRM

The Hartford's independent registered public accounting firm, Deloitte & Touche LLP, has issued their attestation report on the Company's internal control over financial reporting which is set forth below.


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