Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

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 & RMBS Bonds as of March 31, 2022
	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]	$	1,277	$	1,278	$	5	$	5	$	—	$	—	$	—	$	—	$	—	$	—	$	1,282	$	1,283
Bonds	842		831		570		555		440		427		182		177		230		222		2,264		2,212
Interest Only	130		130		87		87		—		—		9		9		1		1		227		227
Total CMBS	2,249		2,239		662		647		440		427		191		186		231		223		3,773		3,722
RMBS
Agency	1,506		1,456		21		21		—		—		—		—		—		—		1,527		1,477
Non-Agency	1,212		1,180		552		525		386		361		241		224		31		30		2,422		2,320
Alt-A	—		—		—		—		—		—		—		—		11		11		11		11
Sub-Prime	8		8		34		35		35		36		10		10		38		39		125		128
Total RMBS	2,726		2,644		607		581		421		397		251		234		80		80		4,085		3,936
Total CMBS & RMBS	$	4,975	$	4,883	$	1,269	$	1,228	$	861	$	824	$	442	$	420	$	311	$	303	$	7,858	$	7,658


Exposure to CMBS & RMBS Bonds 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

*[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 March 31, 2022, mortgage loans had an amortized cost of $5.7 billion and carrying value of $5.7 billion, with an ACL of $31. 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. The increase in the allowance is primarily attributable to net additions of new loans.

The Company funded $442 of commercial mortgage loans with a weighted average loan-to-value (“LTV”) ratio of 56% and a weighted average yield of 2.9% during the three months ended March 31, 2022. 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 March 31, 2022 or December 31, 2021.

Municipal Bonds

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


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Available For Sale Investments in Municipal Bonds
	March 31, 2022					December 31, 2021
	Amortized Cost		Fair Value		Weighted Average Credit Quality	Amortized Cost		Fair Value		Weighted Average Credit Quality
General Obligation	$	892	$	932	AA+	$	910	$	1,031	AA+
Pre-refunded [1]	454		473		AAA	487		519		AAA
Revenue
Transportation	1,492		1,522		A+	1,404		1,579		A+
Health Care	1,359		1,378		A+	1,274		1,397		A+
Leasing [2]	787		789		AA-	813		874		AA-
Education	671		686		AA	670		748		AA
Water & Sewer	455		456		AA	504		538		AA
Sales Tax	359		380		AA	370		436		AA
Power	290		303		A	317		357		A+
Housing	78		74		AA-	98		103		AA
Other	600		601		AA-	626		675		AA-
Total Revenue	6,091		6,189		AA-	6,076		6,707		AA-
Total Municipal	$	7,437	$	7,594	AA-	$	7,473	$	8,257	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 both March 31, 2022 and December 31, 2021, the largest issuer concentrations were the New York State Dormitory Authority, the Pennsylvania State Turnpike Commission, and the State of California, 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.

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.


Limited Partnerships and Other Alternative Investments - Net Investment Income
	Three Months Ended March 31,
		2022			2021
			Amount		Yield [1]		Amount		Yield [1]
Hedge funds			$	8	11.0	%	$	8	18.2	%
Real estate funds			51		14.7	%	1		0.9	%
Private equity funds			68		21.4	%	97		41.8	%
Other alternative investments [2]			(1)		(0.7	%)	6		5.7	%
Total			$	126	14.6	%	$	112	21.1	%

[1]Yields calculated using annualized net investment income divided by the monthly average invested assets.

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


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Investments in Limited Partnerships and Other Alternative Investments
	March 31, 2022				December 31, 2021
	Amount		Percent		Amount		Percent
Hedge funds	$	303	8.3	%	$	274	8.2	%
Real estate funds	1,501		41.0	%	1,315		39.2	%
Private equity and other funds	1,348		36.8	%	1,256		37.5	%
Other alternative investments [1]	507		13.9	%	508		15.1	%
Total	$	3,659	100.0	%	$	3,353	100.0	%

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

Fixed Maturities, AFS — Unrealized Loss Aging

The total gross unrealized losses were $1.0 billion as of March 31, 2022 and have increased $898, from December 31, 2021, primarily due to higher interest rates and wider credit spreads. As of March 31, 2022, $1.031 billion of the gross unrealized losses were associated with fixed maturities, AFS depressed less than 20% of amortized cost. The remaining $11 of gross unrealized losses were associated with fixed maturities, AFS depressed greater than 20%. The fixed maturities, AFS depressed more than 20%, primarily related to corporate fixed maturities with long-dated maturities that are mainly depressed because current interest rates are higher and market spreads are wider than at the respective purchase dates, and because current market spreads on commercial real estate securities are wider than at the respective purchase dates.

As part of the Company’s ongoing investment monitoring process, the Company has reviewed its fixed maturities, AFS in an unrealized loss position and concluded that these fixed maturities are temporarily depressed and are expected to recover in value as the investments approach maturity or as market spreads tighten. For these fixed maturities in an unrealized loss position where an ACL has not been recorded, the Company’s best estimate of expected future cash flows are sufficient to recover the amortized cost basis of the investment. Furthermore, the Company neither has an intention to sell nor does it expect to be required to sell these investments. For further information regarding the Company’s ACL analysis, see the Credit Losses on Fixed Maturities, AFS and Intent-to-Sell Impairments section below.


Unrealized Loss Aging for Fixed Maturities, AFS Securities
	March 31, 2022									December 31, 2021
Consecutive Months	Items	Amortized Cost		ACL		Unrealized Loss		Fair Value		Items	Amortized Cost		ACL		Unrealized Loss		Fair Value
Three months or less	2,063	$	14,471	$	—	$	(457)	$	14,014	640	$	6,193	$	—	$	(32)	$	6,161
Greater than three to six months	574	4,266		—		(215)		4,051		404	3,249		—		(55)		3,194
Greater than six to nine months	384	2,941		—		(234)		2,707		101	571		—		(5)		566
Greater than nine to eleven months	94	530		—		(14)		516		171	1,041		—		(29)		1,012
Twelve months or more	318	1,529		(3)		(122)		1,404		184	631		—		(23)		608
Total	3,433	$	23,737	$	(3)	$	(1,042)	$	22,692	1,500	$	11,685	$	—	$	(144)	$	11,541


Unrealized Loss Aging for Fixed Maturities, AFS Continuously Depressed Over 20%
	March 31, 2022							December 31, 2021
Consecutive Months	Items	Amortized Cost		Unrealized Loss		Fair Value			Items	Amortized Cost		Unrealized Loss		Fair Value
Three months or less	10	$	36	$	(9)	$	27		—	$	—	$	—	$	—



Twelve months or more	19	5		(2)		3			20	5		(3)		2
Total	29	$	41	$	(11)	$	30		20	$	5	$	(3)	$	2

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

Three months ended March 31, 2022

The Company recorded a net increase in the ACL of $12. The increase was primarily attributable to new expected credit losses on four issuers with Russian exposure. Unrealized losses on securities with an ACL recognized in other comprehensive income were less than $1. For further information, refer to Note

5 - Investments of Notes to Condensed Consolidated Financial Statements.

Intent-to-sell impairments of $3 were related to one corporate issuer in the financial services sector.

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.


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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.

Three months ended March 31, 2021

The Company recorded net reversals of credit losses on fixed maturities, AFS of $4, including reversals of $6 and additions of $2. The reversals were primarily attributable to increases in the fair value of corporate issuers that had an ACL, primarily related to a large regional and commercial aircraft lessor. Additions relate to new expected credit losses on a media/entertainment company. Unrealized losses on securities with an ACL recognized in other comprehensive income were $0.

There were no intent-to-sell impairments.

ACL on Mortgage Loans

Three months ended March 31, 2022

The Company reviews mortgage loans on a quarterly basis to estimate the ACL with changes in the ACL recorded in net realized gains and losses. Apart from an ACL recorded on individual mortgage loans where the borrower is experiencing financial difficulties, the Company records an ACL on the pool of mortgage loans based on lifetime expected credit losses. For further information, refer to Note 5 - Investments of Notes to Condensed Consolidated Financial Statements.

The Company recorded an increase in the ACL on mortgage loans of $2, primarily driven by net additions of new loans. The Company did not record an ACL on any individual mortgage loans.

Three months ended March 31, 2021

The Company recorded a decrease in the ACL on mortgage loans of $4. The decrease in the allowance was the result of improved economic scenarios and higher property valuations as compared to the prior quarter. 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 March 31, 2022:

$1.7 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 March 31, 2022, there were no borrowings outstanding; and
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 March 31, 2022, there were no borrowings outstanding.

2022 expected dividends and other sources of capital:

The future payment of dividends from our subsidiaries is dependent on several factors including the business results, capital position and liquidity of our subsidiaries.

P&C -** The Company's U.S. property and casualty insurance subsidiaries have dividend capacity of $2.0 billion for 2022, with $1.3 billion to $1.4 billion of net dividends expected in 2022, including $312 paid to HFSG Holding Company through March 31, 2022.
Group Benefits -** Hartford Life and Accident Insurance Company ("HLA") has dividend capacity of $241 in 2022 with $175 to $200 of dividends expected in 2022, including $16 paid to HFSG Holding Company through March 31, 2022.
Hartford Funds** - HFSG Holding Company expects to receive $175 to $200 in dividends from Hartford Funds in 2022, including $51 received through March 31, 2022.

Expected liquidity requirements for the next twelve months as of March 31, 2022:

$195 of interest on debt;
$21 dividends on preferred stock, subject to the discretion of the Board of Directors;
$515 of common stockholders' dividends, subject to the discretion of the Board of Directors and before share repurchases; and
$600 7.875% junior subordinated debentures redeemed at par on April 15, 2022.


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Expected liquidity requirements for beyond the next twelve months as of March 31, 2022:

Interest on debt and debt repayments, see Note 14 - Debt of Notes to Consolidated Financial Statements in The Hartford's 2021 Form 10-K Annual Report
Preferred stock and common stock dividends, subject to the discretion of the Board of Directors.

Equity repurchase program:

During the three months ended March 31, 2022, the Company repurchased 5.7 million common shares for $400 under the $3.0 billion share repurchase program authorized by the Board of Directors, effective through December 31, 2022. As of March 31, 2022, the Company has $898 remaining for equity repurchases under this share repurchase program. During the period April 1, 2022 through April 27, 2022, the Company repurchased approximately 1.9 million common shares for $139.

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.

|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.

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 April 15, 2022, The Hartford redeemed at par $600 aggregate principal amount of its 7.875% junior subordinated debentures due 2042 and, in the second quarter 2022, will recognize a loss on extinguishment of debt of $9, before tax, for unamortized debt issuance costs. For additional information on the redemption, see Note 11 - Debt of Notes to Condensed Consolidated Financial Statements.

|DIVIDENDS

The Hartford's Board of Directors declared the following quarterly dividends since January 1, 2022:

Common Stock Dividends


Declared	Record	Payable	Amount per share






February 16, 2022	March 1, 2022	April 4, 2022	$	0.385

Preferred Stock Dividends


Declared	Record	Payable	Amount per share





February 16, 2022	May 2, 2022	May 16, 2022	$	375.00

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

For a discussion of restrictions on dividends to the 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 the risk factor "Our ability to declare and pay dividends is subject to limitations" in Item 1A of Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

|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.


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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 Funds at Lloyd's ("FAL") capital requirement and subject to restrictions imposed under UK Company Law. The FAL is determined based on the syndicate’s solvency capital requirement ("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.

Through the first three months of 2022, HFSG Holding Company received $379 of net dividends from its subsidiaries, including $16 from HLA, $51 from Hartford Funds and $312 from its U.S. P&C subsidiaries, excluding $95 of P&C dividends that were subsequently contributed to P&C subsidiaries and $12 of P&C dividends related to interest payments on an intercompany note owed by Hartford Holdings, Inc. ("HHI") to Hartford Fire Insurance Company.

Over the remainder of 2022, the Company anticipates receiving approximately $1.0 billion to $1.1 billion of net dividends from its U.S. P&C subsidiaries, $160 to $185 of dividends from HLA and $125 to $150 of dividends from Hartford Funds.

|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 February 22, 2022 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 Note 11 - Debt of Notes to Condensed Consolidated Financial Statements.

Revolving Credit Facility

The Hartford has a senior unsecured revolving credit facility (the "Credit Facility") that provides up to $750 of unsecured credit through October 27, 2026. As of March 31, 2022, 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 included in the Company’s 2021 Form 10-K Annual Report.

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 March 31, 2022 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 March 31, 2022, there were no advances outstanding.

For further information regarding collateralized advances with FHLBB, see Note 14 - Debt of Notes to Consolidated Financial Statements included in the Company’s 2021 Form 10-K Annual Report.

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


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tranche extending a $104 commitment and the other tranche extending a £85 million ($112 as of March 31, 2022) commitment. As of March 31, 2022, letters of credit with an aggregate face amount of $104 and £65 million, or $86, 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 March 31, 2022, 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 included in the Company’s 2021 Form 10-K Annual Report.

|PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS

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. For further discussion of pension and other postretirement benefit obligations, see Note 16 - Employee Benefit Plans of Notes to Condensed 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 13 - Commitments and Contingencies of Notes to Condensed Consolidated Financial Statements.

As of March 31, 2022, no derivative positions would be subject to immediate termination in the event of a downgrade of one level below the current financial strength ratings. This could change as a result of changes in our hedging activities or to the extent changes in contractual terms are negotiated.

|INSURANCE OPERATIONS

While subject to variability period to period, underwriting and investment cash flows continue to provide sufficient liquidity to meet anticipated demands. The principal sources of operating funds are premiums, fees earned from insurance and administrative service agreements, and investment income,

while investing cash flows primarily originate from maturities and sales of invested assets.

The Company’s insurance operations consist of property and casualty insurance products (collectively referred to as “Property & Casualty Operations”) and 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 March 31, 2022
Fixed maturities	$	31,442
Short-term investments	1,682
Cash	198
Less: Derivative collateral	25
Total	$	33,297

Property & Casualty operations invested assets also include $1.3 billion in equity securities, $4.1 billion in mortgage loans and $2.9 billion in limited partnerships and other alternative investments.


Group Benefits Operations
	As of March 31, 2022
Fixed maturities	$	8,742
Short-term investments	389
Cash	20
Less: Derivative collateral	16
Total	$	9,135

Group Benefits operations invested assets also include $342 in equity securities, $1.6 billion in mortgage loans and $734 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 March 31, 2022 were $31.6 billion. Reserves for Property & Casualty unpaid losses and loss adjustment expenses include case reserves and incurred but not reported ("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 &


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Casualty see Part II, Item 7, MD&A - Critical Accounting Estimates, Property & Casualty Insurance Product Reserves in the Company's 2021 Form 10-K Annual Report, 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 included in the Company's 2021 Form 10-K Annual Report. 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.

Group Benefits reserves as of March 31, 2022 were $9 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 Reserves, Net of Reinsurance, in the Company’s 2021 Form 10-K Annual Report. For additional information about future policy benefits, see Note 10 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 included in the Company's 2021 Form 10-K Annual Report. 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 reserves of $443 as of March 31, 2022 related to retained run-off liabilities of its former life and annuity

business. For additional information about future policy benefits, see Note 10 - 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 March 31, 2022, Hartford Funds cash and short-term investments were $298.

|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 in The Hartford's 2021 Form 10-K Annual Report. 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 in The Hartford's 2021 Form 10-K Annual Report. 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
	March 31, 2022			December 31, 2021			Change
Short-term debt (includes current maturities of long-term debt)	$	591		$	—		NM

Long-term debt	$	4,354		$	4,944		(12	%)
Total debt	4,945			4,944			—	%
Common stockholders' equity excluding AOCI, net of tax	17,262			17,337			—	%
Preferred stock	334			334			—	%
AOCI, net of tax	(1,699)			172			NM
Total stockholders’ equity	15,897			17,843			(11	%)
Total capitalization	$	20,842		$	22,787		(9	%)
Debt to stockholders’ equity	31		%	28		%
Debt to capitalization	24		%	22		%

Total capitalization decreased $1,945 as of March 31, 2022 compared to December 31, 2021 primarily due to net unrealized losses on fixed maturities, available for sale, in first quarter 2022 and due to share repurchases and common stockholder dividends in excess of net income in the period.

For additional information on AOCI, net of tax, including net unrealized gain (losses) from securities, see Note 15 - Changes In and Reclassifications From Accumulated Other

Comprehensive Income (Loss) and Note 5 - Investments of Notes to Condensed Consolidated Financial Statements. For additional information on debt, see Note 11 - Debt of Notes to Condensed Consolidated Financial Statement and Note 14 - Debt of Notes to Consolidated Financial Statement in The Hartford's 2021 Form 10-K Annual Report.


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|CASH FLOW[1]


	Three Months Ended March 31,
	2022		2021
Net cash provided by operating activities	$	429	$	759
Net cash provided by (used for) investing activities	$	126	$	(450)
Net cash used for financing activities	$	(586)	$	(266)
Cash and restricted cash– end of period	$	306	$	280

*[1]*Cash activities in 2021 include cash flows related to Continental Europe Operations that was sold on December 29, 2021. See Note 22 - Business Dispositions of Notes to Consolidated Financial Statements included in The Hartford's 2021 Form 10-K Annual Report for discussion of this transaction.

Cash provided by operating activities decreased in 2022 as compared to the prior year period primarily driven by an increase in P&C and Group Benefits loss and loss adjustment expenses paid, higher operating expenses, including payroll and employee related expenditures, increased commission and higher premium taxes as well as net tax proceeds in the prior year quarter, partially offset by an increase in P&C and Group Benefits premiums received.

Cash provided by (used for) investing activities increased from net outflows in the 2021 period to net inflows in the 2022 period as a result of an increase in net proceeds from fixed maturities and a decrease in net payments for equity securities, partially offset by an increase in net payments for mortgages and an increase in net payments for short-term investments.

Cash used for financing activities increased primarily due an increase in share repurchases in 2022.

Operating cash flow for the three months ended March 31, 2022 has 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 section in this MD&A and the Financial Risk on Statutory Capital section of the MD&A in the Company's 2021 Form 10-K Annual Report.

|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.


Insurance Financial Strength Ratings as of April 27, 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 Risk Factors disclosed in Item 1A of Part I of the Company's Annual Report on Form 10-K for the year ended December 31, 2021.


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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, 2022	$	11,914	$	2,410	$	14,324
Statutory income	486		(11)		475
Contributions from (dividends to) parent	(312)		(16)		(328)

Other items	(60)		9		(51)
Net change to U.S. statutory capital	114		(18)		96
U.S statutory capital at March 31, 2022	$	12,028	$	2,392	$	14,420

*[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.

|CONTINGENCIES

Legal Proceedings

For a discussion regarding The Hartford’s legal proceedings, see the information contained in Note 13 - Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements.

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.

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


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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.

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 included in The Hartford’s 2021 Form 10-K Annual Report.


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ACRONYMS


A&E Asbestos and Environmental			HIMCO Hartford Investment Management Company
ABS Asset Backed Securities			HLA Hartford Life and Accident Insurance Company
ACL Allowance for Credit Losses			IBNR Incurred But Not Reported
ADC Adverse Development Cover			IT Information Technology
AFS Available-For-Sale			LCL Liability for Credit Losses
ALAE Allocated Loss Adjustment Expenses			LIBOR London Inter-Bank Offered Rate
AOCI Accumulated Other Comprehensive Income			LTD Long-Term Disability
AUM Assets Under Management			LTV Loan-to-Value
BSA Boy Scouts of America			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”)
CPRI Credit and Political Risk Insurance			NM Not Meaningful
DAC Deferred Policy Acquisition Costs			NOLs Net Operating Loss Carryforwards or Carrybacks
DEI Diversity, Equity and Inclusion			NSIC Navigators Specialty Insurance Company
DLR Disabled Life Reserve			OCI Other Comprehensive Income
DSCR Debt Service Coverage Ratio			OTC Over-the-Counter
ERCC Enterprise Risk and Capital Committee			P&C Property and Casualty
ESPP The Hartford Employee Stock Purchase Plan			PG&E PG&E Corporation and Pacific Gas and Electric Company
ETF Exchange-Traded Funds			PV&T Political Violence and Terrorism
FAL Funds at Lloyd's			PYD Prior Year Development
FASB Financial Accounting Standards Board			RBC Risk-Based Capital
FHLBB Federal Home Loan Bank of Boston			RMBS Residential Mortgage-Backed Securities
FVO Fair Value Option			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 I - Item 4. Controls and Procedures

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