HIG · Read the filing

Item 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

The Hartford provides projections and other forward-looking information in the following discussions, which contain many forward-looking statements, particularly relating to the Company’s future financial performance. These forward-looking statements are estimates based on information currently available to the Company, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to the cautionary statements set forth on pages 4 and 5 of this Form 10-K. Actual results are likely to differ, and in the past have differed, materially from those forecast by the Company, depending on the outcome of various factors, including, but not limited to, those set forth in the following discussion and in Part I, Item 1A, Risk Factors, and those identified from time to time in our other filings with the Securities and Exchange Commission. The Hartford undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise.

On December 29, 2021, the Company completed the sale of all of the issued and outstanding equity of Navigators Holdings (Europe) N.V., a Belgium holding company, and its subsidiaries, Bracht, Deckers & Mackelbert N.V. (“BDM”) and Assurances Contintales Contintale Verzekeringen N.V. (“ASCO”), (collectively referred to as "Continental Europe Operations").

For discussion of reclassifications, acquisitions, and dispositions, see Note 1 - Basis of Presentation and Significant Accounting Policies, Note 2 - Business Acquisitions and Note 22 - Business Dispositions of Notes to Consolidated Financial Statements.

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

For discussion of the earliest of the three years included in the financial statements of the current filing, refer to Part 2, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in The Hartford’s 2020 Form 10-K Annual Report.

Index

Description Page

Key Performance Measures and Ratios 39

The Hartford's Operations 44

Financial Highlights 48

Consolidated Results of Operations 49

Investment Results 52

Critical Accounting Estimates 54

Commercial Lines 76

Personal Lines 81

Property & Casualty Other Operations 85

Group Benefits 86

Hartford Funds 90

Corporate 92

Enterprise Risk Management 93

Capital Resources and Liquidity 111

Impact of New Accounting Standards 120

Throughout the MD&A, we use certain terms and abbreviations, the more commonly used are summarized in theAcronymssection.

KEY PERFORMANCE MEASURES AND RATIOS

The Company considers the measures and ratios in the following discussion to be key performance indicators for its businesses. Management believes that these ratios and measures are useful in understanding the underlying trends in The Hartford’s businesses. However, these key performance indicators should only be used in conjunction with, and not in lieu of, the results presented in the segment discussions that follow in this MD&A. These ratios and measures may not be comparable to other performance measures used by the Company’s competitors.

Definitions of Non-GAAP and Other Measures and Ratios

Assets Under Management (“AUM”)- Include mutual fund and ETP assets. AUM is a measure used by the Company's Hartford Funds segment because a significant portion of the segments’s revenues and expenses are based upon asset values. These revenues and expenses increase or decrease with a rise or fall in AUM whether caused by changes in the market or through net flows.

Book Value per Diluted Share excluding accumulated other comprehensive income ("AOCI")- This is a non-GAAP per share measure that is calculated by dividing (a) common stockholders' equity, excluding AOCI, after tax, by (b) common shares outstanding

Table of Contents Index to MD&A

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

and dilutive potential common shares. The Company provides this measure to enable investors to analyze the amount of the Company's net worth that is primarily attributable to the Company's business operations. The Company believes that excluding AOCI from the numerator is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period, primarily based on changes in interest rates. Book value per diluted share is the most directly comparable U.S. GAAP measure.

Combined Ratio- The sum of the loss and loss adjustment expense ratio, the expense ratio and the policyholder dividend ratio. This ratio is a relative measurement that describes the related cost of losses and expenses for every $100 of earned premiums. A combined ratio below 100 demonstrates underwriting profit; a combined ratio above 100 demonstrates underwriting losses.

Core Earnings- The Hartford uses the non-GAAP measure core earnings as an important measure of the Company’s operating performance. The Hartford believes that core earnings provides investors with a valuable measure of the performance of the Company’s ongoing businesses because it reveals trends in our insurance and financial services businesses that may be obscured by including the net effect of certain items. Therefore, the following items are excluded from core earnings:

•Certain realized gains and losses - Some realized gains and losses are primarily driven by investment decisions and external economic developments, the nature and timing of which are unrelated to the insurance and underwriting aspects of our business. Accordingly, core earnings excludes the effect of all realized gains and losses that tend to be highly variable from period to period based on capital market conditions. The Hartford believes, however, that some realized gains and losses are integrally related to our insurance operations, so core earnings includes net realized gains and losses such as net periodic settlements on credit derivatives. These net realized gains and losses are directly related to an offsetting item included in the income statement such as net investment income.

•Restructuring and other costs - Costs incurred as part of a restructuring plan are not a recurring operating expense of the business.

•Loss on extinguishment of debt - Largely consisting of make-whole payments or tender premiums upon paying debt off before maturity, these losses are not a recurring operating expense of the business.

•Gains and losses on reinsurance transactions - Gains or losses on reinsurance, such as those entered into upon sale of a business or to reinsure loss reserves, are not a recurring operating expense of the business.

•Integration and other non-recurring M&A costs - These costs, including transaction costs incurred in connection with an acquired business, are incurred over a short period of time and do not represent an ongoing operating expense of the business.

•Change in loss reserves upon acquisition of a business - These changes in loss reserves are excluded from core earnings because such changes could obscure the ability to compare results in periods after the acquisition to results of periods prior to the acquisition.

•Deferred gain resulting from retroactive reinsurance and subsequent changes in the deferred gain - Retroactive reinsurance agreements economically transfer risk to the reinsurers and including the full benefit from retroactive reinsurance in core earnings provides greater insight into the economics of the business.

•Change in valuation allowance on deferred taxes related to non-core components of before tax income - These changes in valuation allowances are excluded from core earnings because they relate to non-core components of before tax income, such as tax attributes like capital loss carryforwards.

•Results of discontinued operations - These results are excluded from core earnings for businesses sold or held for sale because such results could obscure the ability to compare period over period results for our ongoing businesses.

In addition to the above components of net income available to common stockholders that are excluded from core earnings, preferred stock dividends declared, which are excluded from net income available to common stockholders, are included in the determination of core earnings. Preferred stock dividends are a cost of financing more akin to interest expense on debt and are expected to be a recurring expense as long as the preferred stock is outstanding.

Net income (loss) and net income (loss) available to common stockholders are the most directly comparable U.S. GAAP measures to core earnings. Core earnings should not be considered as a substitute for net income (loss) or net income (loss) available to common stockholders and does not reflect the overall profitability of the Company's business. Therefore, The Hartford believes that it is useful for investors to evaluate net income (loss), net income (loss) available to common stockholders, and core earnings when reviewing the Company's performance.

Table of Contents Index to MD&A

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

Reconciliation of Net Income to Core Earnings

For the years ended December 31,

Preferred stock dividends 21 21 21

Net income available to common stockholders $ 2,344 $ 1,716 $ 2,064

Restructuring and other costs, before tax 1 104 —

Loss on extinguishment of debt, before tax — — 90

Loss on reinsurance transactions, before tax — — 91

Integration and other non-recurring M&A costs, before tax 58 51 91

Change in loss reserves upon acquisition of a business, before tax — — 97

Change in deferred gain on retroactive reinsurance, before tax 246 312 16

Income tax expense (benefit) [1] 34 (115) 2

[1] Primarily represents the federal income tax expense (benefit) related to before tax items not included in core earnings and includes the effect of changes in net deferred taxes due to changes in enacted tax rates.

Core Earnings Margin- The Hartford uses the non-GAAP measure core earnings margin to evaluate, and believes it is an important measure of, the Group Benefits segment's operating performance. Core earnings margin is calculated by dividing core earnings by revenues, excluding buyouts and realized gains (losses). Net income margin, calculated by dividing net income by revenues, is the most directly comparable U.S. GAAP measure. The Company believes that core earnings margin provides investors with a valuable measure of the performance of Group Benefits because it reveals trends in the business that may be obscured by the effect of buyouts and realized gains (losses) as well as other items excluded in the calculation of core earnings. Core earnings margin should not be considered as a substitute for net income margin and does not reflect the overall profitability of Group Benefits. Therefore, the Company believes it is important for investors to evaluate both core earnings margin and net income margin when reviewing performance. A reconciliation of net income margin to core earnings margin is set forth in the Results of Operations section within MD&A - Group Benefits.

Current Accident Year Catastrophe Ratio- A component of the loss and loss adjustment expense ratio, represents the ratio of catastrophe losses incurred in the current accident year (net of reinsurance) to earned premiums. For U.S. events, a catastrophe is an event that causes $25 or more in industry insured property losses and affects a significant number of property and casualty policyholders and insurers, as defined by the Property Claim Services office of Verisk. For international events, the Company's approach is similar, informed, in part, by how Lloyd's of London defines catastrophes. Lloyd's of London is an insurance market-place operating worldwide ("Lloyd's"). Lloyd's does not underwrite risks. The Company accepts risks as the sole member of Lloyd's Syndicate 1221 ("Lloyd's Syndicate"). The current accident year catastrophe ratio includes the effect of catastrophe losses, but does not include the effect of reinstatement premiums.

Expense Ratio- For the underwriting segments of Commercial Lines and Personal Lines is the ratio of underwriting expenses less fee income, to earned premiums. Underwriting expenses include the amortization of deferred policy acquisition costs ("DAC") and insurance operating costs and expenses, including certain centralized services costs and bad debt expense. DAC include commissions, taxes, licenses and fees and other incremental direct underwriting expenses and are amortized over the policy term.

The expense ratio for Group Benefits is expressed as the ratio of insurance operating costs and other expenses including amortization of intangibles and amortization of DAC, to premiums and other considerations, excluding buyout premiums.

The expense ratio for Commercial Lines, Personal Lines and Group Benefits does not include integration and other transaction costs associated with an acquired business.

Fee Income- Is largely driven from amounts earned as a result of contractually defined percentages of assets under management in our Hartford Funds business. These fees are generally earned on a daily basis. Therefore, the growth in assets under management either through net inflows or favorable market performance will have a favorable impact on fee income. Conversely, either net outflows or unfavorable market performance will reduce fee income.

Gross New Business Premium- Represents the amount of premiums charged, before ceded reinsurance, for policies issued to customers who were not insured with the Company in the previous policy term. Gross new business premium plus gross renewal written premium less ceded reinsurance equals total written premium.

Loss and Loss Adjustment Expense Ratio- A measure of the cost of claims incurred in the calendar year divided by earned premium and includes losses and loss

Table of Contents Index to MD&A

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

adjustment expenses incurred for both the current and prior accident years. Among other factors, the loss and loss adjustment expense ratio needed for the Company to achieve its targeted return on equity ("ROE") fluctuates from year to year based on changes in the expected investment yield over the claim settlement period, the timing of expected claim settlements and the targeted returns set by management based on the competitive environment.

The loss and loss adjustment expense ratio is affected by claim frequency and claim severity, particularly for shorter-tail property lines of business, where the emergence of claim frequency and severity is credible and likely indicative of ultimate losses. Claim frequency represents the percentage change in the average number of reported claims per unit of exposure in the current accident year compared to that of the previous accident year. Claim severity represents the percentage change in the estimated average cost per claim in the current accident year compared to that of the previous accident year. As one of the factors used to determine pricing, the Company’s practice is to first make an overall assumption about claim frequency and severity for a given line of business and then, as part of the rate-making process, adjust the assumption as appropriate for the particular state, product or coverage.

Loss and Loss Adjustment Expense Ratio before Catastrophes and Prior Accident Year Development- A measure of the cost of non-catastrophe loss and loss adjustment expenses incurred in the current accident year divided by earned premiums. Management believes that the current accident year loss and loss adjustment expense ratio before catastrophes is a performance measure that is useful to investors as it removes the impact of volatile and unpredictable catastrophe losses and prior accident year development.

Loss Ratio, excluding Buyouts- Utilized for the Group Benefits segment and is expressed as a ratio of benefits, losses and loss adjustment expenses, excluding those related to buyout premiums, to premiums and other considerations, excluding buyout premiums. Since Group Benefits occasionally buys a block of claims for a stated premium amount, the Company excludes this buyout from the loss ratio used for evaluating the profitability of the business as buyouts may distort the loss ratio. Buyout premiums represent takeover of open claim liabilities and other non-recurring premium amounts.

Mutual Fund and Exchange-Traded Product Assets- Are owned by the shareholders of those products and not by the Company and, therefore, are not reflected in the Company’s Consolidated Financial Statements except in instances where the Company seeds new investment products.

Mutual fund and ETP assets are a measure used by the Company primarily because a significant portion of the Company’s Hartford Funds segment revenues and expenses are based upon asset values. These revenues and expenses increase or decrease with a rise or fall in AUM whether caused by changes in the market or through net flows.

Net New Business Premium- Represents the amount of premiums charged, after ceded reinsurance, for policies issued to customers who were not insured with the Company in the

previous policy term. Net new business premium plus renewal written premium equals total written premium.

Policy Count Retention- Represents the ratio of the number of renewal policies issued during the current year period divided by the number of policies issued in the previous calendar period before considering policies cancelled subsequent to renewal. Policy count retention is affected by a number of factors, including the percentage of renewal policy quotes accepted and decisions by the Company to non-renew policies because of specific policy underwriting concerns or because of a decision to reduce premium writings in certain classes of business or states. Policy count retention is also affected by advertising and rate actions taken by competitors.

Policy Count Retention, Net of Cancellations- Represents the ratio of the number of renewal policies issued net of cancellations during the current year period divided by the number of policies issued net of cancellations in the previous calendar period.

Policies in Force- Represents the number of policies with coverage in effect as of the end of the period. The number of policies in force is a growth measure used for Personal Lines and standard commercial lines (small commercial and middle market lines within middle & large commercial) within Commercial Lines and is affected by both new business growth and policy count retention.

Policyholder Dividend Ratio- The ratio of policyholder dividends to earned premium.

Prior Accident Year Loss and Loss Adjustment Expense Ratio- Represents the increase (decrease) in the estimated cost of settling catastrophe and non-catastrophe claims incurred in prior accident years as recorded in the current calendar year divided by earned premiums.

Reinstatement Premiums- Represents additional ceded premium paid for the reinstatement of the amount of reinsurance coverage that was reduced as a result of the Company ceding losses to reinsurers.

Renewal Earned Price Increase (Decrease)- Written premiums are earned over the policy term, which is six months for certain Personal Lines automobile business and twelve months for substantially all of the remainder of the Company’s Property and Casualty business. Since the Company earns premiums over the six to twelve month term of the policies, renewal earned price increases (decreases) lag renewal written price increases (decreases) by six to twelve months.

Renewal Written Price Increase (Decrease)- For Commercial Lines, represents the combined effect of rate changes, amount of insurance and individual risk pricing decisions per unit of exposure on commercial lines policies that renewed. For Personal Lines, renewal written price increases represent the total change in premium per policy since the prior year on those policies that renewed and includes the combined effect of rate changes, amount of insurance and other changes in exposure. For Personal Lines, other changes in exposure include, but are not limited to, the effect of changes in number of drivers, vehicles and incidents, as well as changes in customer policy elections, such as deductibles and limits. The rate

Table of Contents Index to MD&A

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

component represents the change in rate filed with and approved by state regulators during the period and the amount of insurance represents the change in the value of the rating base, such as model year/vehicle symbol for automobiles, building replacement costs for property and wage inflation for workers’ compensation. A number of factors affect renewal written price increases (decreases) including expected loss costs as projected by the Company’s pricing actuaries, rate filings approved by state regulators, risk selection decisions made by the Company’s underwriters and marketplace competition. Renewal written price changes reflect the property and casualty insurance market cycle. Prices tend to increase for a particular line of business when insurance carriers have incurred significant losses in that line of business in the recent past or the industry as a whole commits less of its capital to writing exposures in that line of business. Prices tend to decrease when recent loss experience has been favorable or when competition among insurance carriers increases. Renewal written price statistics are subject to change from period to period, based on a number of factors, including changes in actuarial estimates and the effect of subsequent cancellations and non-renewals, and modifications made to better reflect ultimate pricing achieved.

Return on Assets ("ROA"), Core Earnings-The Company uses this non-GAAP financial measure to evaluate, and believes is an important measure of, the Hartford Funds segment’s operating performance. ROA, core earnings is calculated by dividing annualized core earnings by a daily average AUM. ROA is the most directly comparable U.S. GAAP measure. The Company believes that ROA, core earnings, provides investors with a valuable measure of the performance of the Hartford Funds segment because it reveals trends in our business that may be obscured by the effect of items excluded in the calculation of core earnings. ROA, core earnings, should not be considered as a substitute for ROA and does not reflect the overall profitability of our Hartford Funds business. Therefore, the Company believes it is important for investors to evaluate both ROA, and ROA, core earnings when reviewing the Hartford Funds segment performance. A reconciliation of ROA to ROA, core earnings is set forth in the Results of Operations section within MD&A - Hartford Funds.

Underlying Combined Ratio-This non-GAAP financial measure of underwriting results represents the combined ratio before catastrophes, prior accident year development and current accident year change in loss reserves upon acquisition of a business. Combined ratio is the most directly comparable GAAP measure. The underlying combined ratio represents the combined ratio for the current accident year, excluding the impact of current accident year catastrophes and current accident year change in loss reserves upon acquisition of a business. The Company believes this ratio is an important measure of the trend in profitability since it removes the impact of volatile and unpredictable catastrophe losses and prior accident year loss and loss adjustment expense reserve development. The changes to loss reserves upon acquisition of a business are excluded from underlying combined ratio because such changes could obscure the ability to compare results in periods after the acquisition to results of periods prior to the acquisition as such trends are valuable to our investors' ability to assess the Company's financial performance. A reconciliation of combined ratio to underlying combined ratio is set forth in the Results of Operations section within MD&A - Commercial Lines and Personal Lines.

Underwriting Gain (Loss)- The Hartford's management evaluates profitability of the Commercial and Personal Lines segments primarily on the basis of underwriting gain or loss. Underwriting gain (loss) is a before tax non-GAAP measure that represents earned premiums less incurred losses, loss adjustment expenses and underwriting expenses. Net income (loss) is the most directly comparable GAAP measure. Underwriting gain (loss) is influenced significantly by earned premium growth and the adequacy of The Hartford's pricing. Underwriting profitability over time is also greatly influenced by The Hartford's underwriting discipline, as management strives to manage exposure to loss through favorable risk selection and diversification, effective management of claims, use of reinsurance and its ability to manage its expenses. The Hartford believes that the measure underwriting gain (loss) provides investors with a valuable measure of profitability, before tax, derived from underwriting activities, which are managed separately from the Company's investing activities.

Table of Contents Index to MD&A

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

Reconciliation of Net Income to Underwriting Gain (Loss)

For the years ended December 31,

Commercial Lines

Adjustments to reconcile net income to underwriting gain (loss):

Net servicing income (13) (4) (2)

Net realized losses (gains) (260) 60 (271)

Loss on reinsurance transaction — — 91

Underwriting gain (loss) $ 402 $ (37) $ 189

Personal Lines

Adjustments to reconcile net income to underwriting gain (loss):

Net servicing income (19) (14) (13)

Net realized losses (gains) (29) 5 (43)

Other expense — 1 1

P&C Other Ops

Adjustments to reconcile net income to underwriting gain (loss):

Net investment income (75) (55) (84)

Net realized losses (gains) (13) 1 (20)

Other expense (income) 1 (1) —

Income tax expense (benefit) (28) (46) 12

Written and Earned Premiums- Written premium represents the amount of premiums charged for policies issued, net of reinsurance, during a fiscal period. Premiums are considered earned and are included in the financial results on a pro rata basis over the policy period. Management believes that written premium is a performance measure that is useful to investors as it reflects current trends in the Company’s sale of property and casualty insurance products. Written and earned premium are recorded net of ceded reinsurance premium.

Traditional life and disability insurance type products, such as those sold by Group Benefits, collect premiums from policyholders in exchange for financial protection for the policyholder from a specified insurable loss, such as death or disability. These premiums, together with net investment income earned, are used to pay the contractual obligations under these insurance contracts.

Two major factors, new sales and persistency, impact premium growth. Sales can increase or decrease in a given year based on a number of factors including, but not limited to, customer demand for the Company’s product offerings, pricing competition, distribution channels and the Company’s reputation

and ratings. Persistency refers to the percentage of premium remaining in-force from year-to-year.

THE HARTFORD'S OPERATIONS

The Hartford conducts business principally in five reporting segments including Commercial Lines, Personal Lines, Property & Casualty Other Operations, Group Benefits and Hartford Funds, as well as a Corporate category. The Company includes in the Corporate category reserves for run-off structured settlement and terminal funding agreement liabilities, restructuring costs, capital raising activities (including equity financing, debt financing and related interest expense), transaction expenses incurred in connection with an acquisition, certain M&A costs, purchase accounting adjustments related to goodwill and other expenses not allocated to the reporting segments. Corporate also includes investment management fees and expenses related to managing third party business, including management of a portion of the invested assets of Talcott Resolution Life, Inc. and its subsidiaries as well as

Table of Contents Index to MD&A

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

certain affiliates. In addition, up until June 30, 2021, Corporate included a 9.7% ownership interest in Hopmeadow Holdings LP, the legal entity that acquired Talcott Resolution in May 2018 (Hopmeadow Holdings, LP, Talcott Resolution Life Inc., and its subsidiaries are collectively referred to as "Talcott Resolution"). The sale of Talcott Resolution to a new investor was completed on June 30, 2021. The Company received a total of $217 in connection with the sale of its 9.7% ownership interest, resulting in a realized gain of $46 before tax in 2021.

The Company derives its revenues principally from: (a) premiums earned for insurance coverage provided to insureds; (b) management fees on mutual fund and ETP assets; (c) net investment income; (d) fees earned for services provided to third parties; and (e) net realized gains and losses. Premiums charged for insurance coverage are earned principally on a pro rata basis over the terms of the related policies in-force.

The profitability of the Company's property and casualty insurance businesses over time is greatly influenced by the Company’s underwriting discipline, which seeks to manage exposure to loss through favorable risk selection and diversification, its management of claims, its use of reinsurance, the size of its in force block, actual mortality and morbidity experience, and its ability to manage its expense ratio which it accomplishes through economies of scale and its management of acquisition costs and other underwriting expenses. Pricing adequacy depends on a number of factors, including the ability to obtain regulatory approval for rate changes, proper evaluation of underwriting risks, the ability to project future loss cost frequency and severity based on historical loss experience adjusted for known trends, the Company’s response to rate actions taken by competitors, its expense levels and expectations about regulatory and legal developments. The Company seeks to price its insurance policies such that insurance premiums and future net investment income earned on premiums received will cover underwriting expenses and the ultimate cost of paying claims reported on the policies and provide for a profit margin. For many of its insurance products, the Company is required to obtain approval for its premium rates from state insurance departments and the Lloyd's Syndicate's ability to write business is subject to Lloyd's approval for its premium capacity each year. Most of Personal Lines written premium is associated with our exclusive licensing agreement with AARP, which is effective through December 31, 2032. This agreement provides an important competitive advantage given the size of the 50 plus population and the strength of the AARP brand.

Similar to property and casualty, profitability of the group benefits business depends, in large part, on the ability to evaluate and price risks appropriately and make reliable estimates of mortality, morbidity, disability and longevity. To manage the pricing risk, Group Benefits generally offers term insurance policies, allowing for the adjustment of rates or policy terms in order to minimize the adverse effect of market trends, loss costs, declining interest rates and other factors. However, as policies are typically sold with rate guarantees of up to three years, pricing for the Company’s products could prove to be inadequate if loss and expense trends emerge adversely during the rate guarantee period or if investment returns are lower than expected at the time the products were sold. For some of its products, the Company is required to obtain approval for its premium rates from state insurance departments. New and

renewal business for group benefits business, particularly for long-term disability, are priced using an assumption about expected investment yields over time. While the Company employs asset-liability duration matching strategies to mitigate risk and may use interest-rate sensitive derivatives to hedge its exposure in the Group Benefits investment portfolio, cash flow patterns related to the payment of benefits and claims are uncertain and actual investment yields could differ significantly from expected investment yields, affecting profitability of the business. In addition to appropriately evaluating and pricing risks, the profitability of the Group Benefits business depends on other factors, including the Company’s response to pricing decisions and other actions taken by competitors, its ability to offer voluntary products and self-service capabilities, the persistency of its sold business and its ability to manage its expenses which it seeks to achieve through economies of scale and operating efficiencies.

The financial results of the Company’s mutual fund and ETP businesses depend largely on the amount of assets under management and the level of fees charged based, in part, on asset share class and product type. Changes in assets under management are driven by the two main factors of net flows and the market return of the funds, which are heavily influenced by the return realized in the equity and bond markets. Net flows are comprised of new sales less redemptions by mutual fund and ETP shareholders. Financial results are highly correlated to the growth in assets under management since these products generally earn fee income on a daily basis.

The investment return, or yield, on invested assets is an important element of the Company’s earnings since insurance products are priced with the assumption that premiums received can be invested for a period of time before benefits, losses and loss adjustment expenses are paid. Due to the need to maintain sufficient liquidity to satisfy claim obligations, the majority of the Company’s invested assets have been held in available-for-sale securities, including, among other asset classes, corporate bonds, municipal bonds, government debt, short-term debt, mortgage-backed securities, asset-backed securities and collateralized loan obligations. The primary investment objective for the Company is to maximize economic value, consistent with acceptable risk parameters, including the management of credit risk and interest rate sensitivity of invested assets, while generating sufficient net of tax income to meet policyholder and corporate obligations. Investment strategies are developed based on a variety of factors including business needs, regulatory requirements and tax considerations.

Impact of COVID-19 on our financial condition, results of operations and liquidity

Impact to written and earned premiums

Despite the rollout of vaccines and states largely lifting restrictions allowing business to re-open, the COVID-19 pandemic continues to pose a threat to the economic recovery of the U.S. and other countries in which we operate. As one of the largest providers of small business insurance in the U.S., we were negatively affected by economic effects of the pandemic on small businesses beginning in March of 2020. An

Table of Contents Index to MD&A

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

improvement in economic conditions in 2021 has contributed to an increase of 11% in our small commercial written premiums. Our middle & large commercial business was also negatively affected by COVID-19 and written premium has rebounded with an increase of 12% in 2021. Overall, Commercial Lines written premium increased $1,072, or 12%, in 2021 with growth in workers' compensation, small commercial package business, general liability, U.S. wholesale, U.S. financial lines and global reinsurance.

Personal Lines written premium declined 1% in 2021 due to the effect of non-renewed premium exceeding new business, partially offset by the effect of premium credits given in the second quarter of 2020.

In Group Benefits, fully insured ongoing premium increased 4% in 2021, primarily due to higher in-force employer group

disability premiums and higher supplemental health product premiums.

Impact to direct benefits, losses and loss adjustment expenses from COVID-19 claims

Total pandemic-related losses were higher in 2021 compared to 2020 driven by higher excess mortality in our group life business and an increase in pandemic-related short-term disability claims, partially offset by a reduction of P&C COVID-19 incurred losses.

For the year ended December 31,

Excess mortality claims on group life $ 583 $ 239

COVID-19 short-term disability claims [1] 31 (9)

Workers' compensation COVID-19 claims 20 66

Global specialty financial lines and other 11 71

Commercial property — 141

Total direct COVID-19 and excess mortality claims $ 645 $ 508

[1]The year ended December 31, 2020 included both short-term disability and New York paid family leave claims related to COVID-19 and lower incurred losses due to fewer elective procedures during the early stages of the pandemic more than offset direct COVID-19 incurred losses.

Excess mortality in the group life business includes both claims where COVID-19 is specifically listed as the cause of death and indirect impacts of the pandemic such as causes of death due to patients deferring regular treatments of chronic conditions. The incidence of excess mortality claims is subject to significant uncertainty as it is dependent on a number of factors difficult to predict including, among others, the ultimate vaccination rate of the population, the potential spread of new COVID-19 variants, the effectiveness of the vaccines against new variants, the effectiveness of other treatments to prevent serious illness and death, the percentage of those infected who are of working age and the strain on the health care system preventing timely treatment of chronic illnesses.

Within P&C, direct COVID-19 incurred losses in 2021 were predominantly on workers' compensation claims incurred in the first quarter. We incur COVID-19 workers’ compensation losses when it is determined that workers were exposed to COVID-19 out of and in the course of their employment and in other cases where states have passed laws providing for the presumption of coverage for certain industry classes, including health care and other essential workers.

Apart from COVID-19 workers' compensation claims, net of favorable frequency, and incurred losses within financial lines, P&C COVID-19 incurred losses in 2020 primarily included $141 for property claims. There were no COVID-19 P&C property losses incurred in 2021. Nearly all of our property insurance policies require direct physical loss or damage to property and contain standard exclusions that we believe preclude coverage for COVID-19 related claims, and the vast majority of such policies contain exclusions for virus-related losses.

Other impacts from COVID-19

In Personal Lines automobile, miles driven and average claim severity increased in 2021, which has increased automobile loss costs. In addition, as the effects of favorable claim frequency

from lower miles driven during the pandemic have been factored into rates, we have experienced lower earned pricing increases resulting in a higher automobile loss ratio in 2021 than in 2020. Refer to Personal Lines Results of Operations for discussion of pricing and loss cost trends for the year ended December 31, 2021.

As we emerge from the pandemic, inflationary pressures in the economy have resulted in increased claim severity in 2021 in automobile and property lines of business in both Commercial Lines and Personal Lines. As expectations of inflationary pressures have increased, interest rates rose in 2021 and higher interest rates reduce the fair value of our investments in fixed maturity securities, available for sale ("AFS").

Aided by some improvement in the economy and the effect of the government’s economic stimulus payments to our customers, in 2021, we recorded a decrease of $47 in the allowance for credit losses ("ACL") on premiums receivable, reflecting a lower expectation of credit losses, though there remains an elevated risk of uncollectible premiums receivable relative to historical trends if economic conditions do not improve further.

As we emerge from the pandemic, we expect travel costs and certain employee benefits costs will increase relative to the lower level of those costs we have incurred in 2020 and 2021.

For information about resources the Company has to manage capital and liquidity, refer to the Capital Resources & Liquidity section of MD&A.

For additional information about the potential economic impacts to the Company of the COVID-19 pandemic, see the risk factor "The pandemic caused by the spread of COVID-19 has disrupted our operations and may have a material adverse

Table of Contents Index to MD&A

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

impact on our business results, financial condition, results of operations and/or liquidity" in Item 1A of Part I.

Operational transformation and cost reduction plan

In recognition of the need to become more cost efficient and competitive along with enhancing the experience we provide to agents and customers, on July 30, 2020, the Company announced an operational transformation and cost reduction plan it refers to as Hartford Next.Through reduction of its headcount, IT investments to further enhance our capabilities, and other activities, relative to 2019, the Company expects to achieve a reduction in annual insurance operating costs and other expenses of approximately $540 by 2022 and $625 by 2023.

To achieve those expected savings, we expect to incur approximately $401 over the course of the program, with $217

expensed cumulatively through December 31, 2021, and expected expenses of $89 in 2022, $38 in 2023 and $57 after 2023, with the expenses after 2023 consisting mostly of amortization of internal use software and capitalized real estate costs. Included in the estimated costs of $401, we expect to incur restructuring costs of approximately $130, including $48 of employee severance, and approximately $82 of other costs, including consulting expenses, lease termination expenses and the cost to retire certain IT applications. Restructuring costs are reported as a charge to net income but not in core earnings.

The following table presents Hartford Next program costs incurred, including restructuring costs, and expense savings relative to 2019 realized in 2021 and expected annual costs and expense savings relative to 2019 for the full year in 2022 and 2023:

Hartford Next Costs and Expense Savings

Employee severance $ 73 $ (25) $ — $ —

IT costs to retire applications 2 9 10 —

Professional fees and other expenses 29 17 15 —

Estimated restructuring costs 104 1 25 —

Amortization of capitalized IT development costs [1] — — 4 9

Amortization of capitalized real estate [2] — — 1 1

Estimated costs within core earnings 49 63 64 38

Total Hartford Next program costs 153 64 89 38

Net expense (savings) before tax $ 47 $ (359) $ (451) $ (587)

Net expense (savings) before tax:

To be accounted for within core earnings $ (57) $ (360) $ (476) $ (587)

Restructuring costs recognized outside of core earnings 104 1 25 —

Net expense (savings) before tax $ 47 $ (359) $ (451) $ (587)

[1]Does not include approximately $34 of IT asset amortization after 2023.

[2]Does not include approximately $19 of real estate amortization after 2023.

Table of Contents Index to MD&A

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

2021 FINANCIAL HIGHLIGHTS

+ Lower restructuring costs

+ Increase in earnings from Hartford Funds

- Higher current accident year catastrophes

- An increase in personal automobile claim frequency and severity

- Lower income from the former Talcott Resolution investment

Ý Increased 50 bps Þ Improved 0.1 points Þ Decreased 2.5 points

+ Higher net investment income

- Higher current accident year catastrophes + Greater net realized gains

- Higher personal automobile claim frequency and severity

- An increase in underwriting expenses

Table of Contents Index to MD&A

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

CONSOLIDATED RESULTS OF OPERATIONS

The Consolidated Results of Operations should be read in conjunction withthe Company's Consolidated Financial Statements and the related Notesas well as with the segment operating results sections of the MD&A.

Consolidated Results of Operations

Amortization of deferred policy acquisition costs 1,680 1,706 1,622 (2 %) 5 %

Insurance operating costs and other expenses 4,779 4,480 4,580 7 % (2 %)

Loss on extinguishment of debt — — 90 — % (100 %)

Loss on reinsurance transactions — — 91 — % (100 %)

Amortization of other intangible assets 71 72 66 (1 %) 9 %

Restructuring and other costs 1 104 — (99 %) NM

Preferred stock dividends 21 21 21 — % — %

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

Net income available to common stockholders increased by $628 primarily driven by:

•A $523 before tax change from net realized losses in 2020 to net realized gains in 2021, primarily driven by changes in valuation and sales of equity securities from losses in the 2020 period to gains in the 2021 period;

•An increase in net investment income of $467 before tax driven by higher returns on limited partnerships and other alternative investments;

• A $103 before tax decrease in restructuring costs related to the Hartford Next operational transformation and cost reduction plan;

•An increase in earnings from Hartford Funds; and

•An increase in P&C underwriting results of $36 before tax, with a reduction in COVID-19 incurred losses, a lower Commercial Lines underlying loss and loss adjustment expense ratio before COVID-19 and the effect of earned premium growth largely offset by a change to net unfavorable prior accident year reserve development, higher personal automobile loss costs and higher underwriting expenses.

These increases were partially offset by:

•A $384 before tax increase in excess mortality claims and COVID-19 related impacts to short-term-disability losses; and

•Lower income from the Talcott Resolution investment, which was divested on June 30, 2021.

For a discussion of the Company's operating results by segment, see MD&A - Segment Operating Summaries. In addition, for further discussion of impacts resulting from the COVID-19 pandemic, refer to the Impact of COVID-19 on our financial condition, results of operations and liquidity section of this MD&A.

Table of Contents Index to MD&A

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

REVENUE

Earned Premiums

[1]For the years ended 2020 and 2019, the total includes $9, and $10 respectively, recorded in Corporate other revenue.

Earned premiums increased primarily due to:

•An increase in P&C reflecting a 7% increase in Commercial Lines and a 2% decrease in Personal Lines. Contributing to the increase in Commercial Lines was the effect of higher audit and endorsement premiums as the result of higher insured exposures given the economic recovery in 2021. For Personal Lines, the effect of non-renewals outpacing new business was partially offset by the effect of $81 in COVID-related premium credits in the 2020 period; and

•An increase in Group Benefits earned premium of 3% year over year due to an increase in group disability and higher supplemental health product premiums, partially offset by the effect of buyout premium in the 2020 period.

Fee income increased, largely driven by Hartford Funds as a result of higher daily average assets under management due to an increase in equity market levels and net inflows.

Other revenues decreased by $45, primarily driven by lower income of $53 before tax from the Talcott Resolution investment, which was divested on June 30, 2021.

Net investment income increased primarily due to:

•Greater income from limited partnerships and other alternative investments primarily driven by higher valuations and cash distributions within private equity funds and sales of underlying investments within real estate funds;

•A higher level of invested assets;

Net Investment Income

•Greater income from non-routine income items, including yield adjustments on prepayable securities; and

•Higher yield from equity investments.

These increases were partially offset by:

•A lower yield on fixed maturity investments resulting from reinvesting at lower rates and a lower yield on floating rate investments.

Net realized gains (losses) changed from net losses in the 2020 period to net gains in the 2021 period, primarily driven by:

•Gains on equity securities in the 2021 period driven by appreciation in value compared to losses on equity securities in the 2020 period, partially offset by net realized gains in the 2020 period upon termination of derivatives used to hedge against a decline in equity market levels;

•A net reduction in ACL on mortgage loans and fixed maturities in the 2021 period due to an improved economic outlook, compared to increases in the ACL on mortgage loans and fixed maturities in the 2020 period;

•A $46 before tax net realized gain in 2021 resulting from sale of the Company's 9.7% previously owned interest in Talcott Resolution;

•A lower level of losses in 2021 than in 2020 related to the sale of the Continental Europe Operations; and

•Higher net realized gains on sales of fixed maturity securities.

For further discussion of investment results, see MD&A - Investment Results, Net Realized Gains and MD&A - Investment Results, Net Investment Income.

Table of Contents Index to MD&A

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

BENEFITS, LOSSES AND EXPENSES

P&C Losses and LAE Incurred

Benefits, losses and loss adjustment expenses increased due to:

•An increase in incurred losses for Property & Casualty of $457 which was driven by:

•An unfavorable change of $335 in P&C net prior accident year reserve development. Prior accident year reserve development in the 2021 period was a net unfavorable $199 before tax, driven by reserve increases for sexual molestation and sexual abuse claims, primarily to reflect claims made against the Boy Scouts of America ("BSA"), partially offset by reserve decreases in workers' compensation, catastrophes, package business, personal automobile, commercial property, and bond. Prior accident year development in the 2021 period also included adverse reserve development ceded to NICO under an adverse development cover ("ADC") of $155 before tax for A&E reserves and $91 before tax for Navigators reserves related to 2018 and prior accident years, both of which the Company recognized a deferred gain under retroactive reinsurance accounting. Prior accident year reserve development in 2020 was a favorable $136 before tax, driven by $529 of reserve reductions related to catastrophes, including decreases in estimated losses arising from wind and hail events in 2017, 2018 and 2019 and from the 2017 and 2018 California wildfires, including a $289 before tax subrogation benefit from PG&E Corporation and Pacific Gas and Electric Company (together, "PG&E"). Reserve development in 2020 also included a $254 before tax reserve increase for sexual molestation and abuse claims, a $208 before tax increase in A&E reserves and a $102 before tax of adverse development for Navigators related to 2018 and prior accident years. While $220 of A&E and $102 of Navigators’ reserve development in 2020 has been economically ceded to

Group Benefits Losses and LAE Incurred

NICO, the Company recognized a $312 deferred gain under retroactive reinsurance accounting with $10 of the $220 ceded A&E losses recognized as a benefit to income in 2020. For further discussion, see Note 12 - Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Consolidated Financial Statements;

•An increase in current accident year catastrophe losses of $58, before tax. Catastrophe losses in the 2021 period were principally from hurricane Ida and February winter storms, as well as from tornado, wind and hail events in Texas, the Midwest and Southeast. Catastrophe losses in 2020 were primarily from civil unrest, a number of hurricanes and tropical storms, Pacific Coast wildfires and Northeast windstorms as well as tornado, wind and hail events in the South, Midwest and Central Plains; and

•An increase in P&C current accident year ("CAY") loss and loss adjustment expenses before catastrophes primarily due to the effect of higher earned premiums in commercial lines, higher personal automobile claim frequency and severity, and higher non-catastrophe property losses partially offset by a $247 before tax decrease in COVID-19 incurred losses and lower current accident year loss ratios before COVID-19 in global specialty, workers’ compensation and general liability.

•An increase in Group Benefits of $475 primarily driven by a $344 before tax increase in excess mortality claims in group life, the effect of an increase in earned premiums and higher short-term and long-term disability claim incidence especially compared to the favorable incidence levels experienced during the early stages of the pandemic. The increased claim incidence was partially offset by a higher

Table of Contents Index to MD&A

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

favorable New York Paid Family Leave adjustment recognized in the 2021 period.

For further discussion of impacts resulting from the COVID-19 pandemic, refer to the impact of COVID-19 on our financial condition, results of operations and liquidity section of this MD&A.

Amortization of deferred policy acquisition costs decreased from the prior year period driven, in part, by a decrease in Personal Lines due to lower earned premiums.

Insurance operating costs and other expenses increased due to:

•Higher variable costs of the Hartford Funds business due to higher daily average assets under management;

•Higher variable incentive compensation costs;

•An increase in supplemental and contingent commissions;

•Increased costs in Group Benefits to handle elevated claim levels resulting from the pandemic, higher technology costs and increased AARP direct marketing costs in Personal Lines; and

•Legal and consulting costs associated with the unsolicited proposals from Chubb Limited (“Chubb”) to acquire the Company.

These increases were partially offset by:

•Lower staffing and other costs driven by the Company’s Hartford Next operational transformation and cost reduction plan; and

•A decrease in the ACL on uncollectible premiums receivable in Property & Casualty and Group Benefits in the 2021 period compared to an increase in the 2020 period due to the economic impacts of COVID-19.

Restructuring and other costs decreased as the prior year period included severance costs related to the Company's Hartford Next operational transformation and cost reduction plan. For further discussion of impacts resulting from the Hartford Next initiative, see MD&A - The Hartford's Operations, The Hartford's Operations, Operational Transformation and Cost Reduction Plan and Note 23 - Restructuring and Other Costs of Notes to Consolidated Financial Statements.

Income tax expense increased primarily due to an increase in income before tax.

For further discussion of income taxes, see Note 17 - Income Taxes of Notes to Consolidated Financial Statements.

INVESTMENT RESULTS

Composition of Invested Assets

Amount Percent Amount Percent

Limited partnerships and other alternative investments 3,353 5.8 % 2,082 3.7 %

[1] Primarily consists of fixed maturities, at fair value using the fair value option ("FVO"), equity fund investments, overseas deposits, consolidated investment funds and derivative instruments which are carried at fair value.

December 31, 2021 compared to December 31, 2020

Total investments increased primarily due to an increase in limited partnerships and other alternative investments, mortgage loans, and equity securities, partially offset by a decrease in fixed maturities, AFS.

Limited partnerships and other alternative investments increased primarily driven by increased valuations and additional investments in real estate joint ventures.

Mortgage loans increased largely due to funding of industrial, multifamily, and retail commercial whole loans.

Equity securities increased due to net purchases and appreciation in value due to higher equity market levels.

Fixed maturities, AFS decreased 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.

Table of Contents Index to MD&A

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

Net Investment Income

For the years ended December 31,

(Before tax) Amount Yield [1] Amount Yield [1] Amount Yield [1]

Investment expense (80) (71) (83)

[1]Yields calculated using annualized net investment income divided by the monthly average invested assets at amortized cost, as applicable, excluding repurchase agreement and securities lending collateral, if any, and derivatives book value.

[2]Includes net investment income on short-term investments.

[3]Primarily includes changes in fair value of certain equity fund investments and income from derivatives that qualify for hedge accounting and are used to hedge fixed maturities.

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

Total net investment income increased primarily due to:

•A higher level of invested assets;

•Greater income from non-routine items, including yield adjustments on prepayable securities; and

•A higher yield from equity investments.

These increases were partially offset by a lower yield on fixed maturities resulting from reinvesting at lower rates and a lower yield on floating rate investments.

Annualized net investment income yield, excluding limited partnerships and other alternative investments, was down primarily due to lower reinvestment rates, partially offset

by greater income from non-routine income items and a higher yield on equity securities.

Average reinvestment rate, on fixed maturities and mortgage loans, excluding certain U.S. Treasury securities, for the year-ended December 31, 2021, was 2.6% which was below the average yield of sales and maturities of 3.0% for the same period. Average reinvestment rate for the year-ended December 31, 2020, was 2.5% which was below the average yield of sales and maturities of 3.4%.

For the 2022 calendar year, we expect the annualized net investment income yield, excluding limited partnerships and other alternative investments, to be lower than the portfolio yield earned in 2021 due to lower reinvestment rates. The estimated impact on annualized net investment income yield is subject to variability due to evolving market conditions, active portfolio management, and the level of non-routine income items, such as make-whole payments, prepayment penalties on mortgage loans and yield adjustments on prepayable securities.

Table of Contents Index to MD&A

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

Net Realized Gains (Losses)

For the years ended December 31,

Gross gains on sales of fixed maturities $ 319 $ 255 $ 234

Gross losses on sales of fixed maturities (89) (50) (56)

Net credit losses on fixed maturities, AFS [2] 4 (28)

Change in ACL on mortgage loans [3] 9 (19)

Intent-to-sell impairments [2] — (5) —

Net other-than-temporary impairment ("OTTI") losses recognized in earnings (3)

Valuation allowances on mortgage loans 1

Net realized gains (losses) $ 509 $ (14) $ 395

[1]The net unrealized gains on equity securities still held as of the end of the period and included in net realized gains (losses) were $155, $53, and $164 for the years ended December 31, 2021, 2020, and 2019, respectively.

[2]Due to the adoption of accounting guidance for credit losses on January 1, 2020, realized losses previously reported as OTTI are now presented as credit losses which are net of any recoveries. For further information refer to Note 1 - Basis of Presentation and Significant Accounting Policies. In addition, see Credit Losses on Fixed Maturities, AFS and Intent-to-Sell Impairments within the Investment Portfolio Risks and Risk Management section of the MD&A.

[3]Represents the change in ACL recorded during the period following the adoption of accounting guidance for credit losses on January 1, 2020. For further information refer to Note 1 - Basis of Presentation and Significant Accounting Policies. In addition, see ACL on Mortgage Loans within the Investment Portfolio Risks and Risk Management section of the MD&A.

[4]Includes gains (losses) on non-qualifying derivatives for 2021, 2020, and 2019 of $12, $104, and $(24), respectively, gains (losses) from transactional foreign currency revaluation of $(1), $(1) and (9), respectively, and a loss of $21 and $48, respectively, on the sale of Continental Europe Operations for the years ended December 31, 2021 and 2020. For the year-ended December 31, 2021, there was also a gain of $46 on the sale of the Company's previously owned interest in Talcott Resolution.

Year ended December 31, 2021

Gross gains and losses on sales were primarily due to net sales of corporate securities and tax-exempt municipals, in addition to sales of U.S. treasuries for duration and risk management.

Equity securities net gains were primarily driven by appreciation in value due to higher equity market levels and gains realized on exit of private equity direct investments.

Other, net gains and losses included a gain of $46 on the sale of the Company's 9.7% retained interest in Talcott Resolution, sold on June 30, 2021, and a loss of $21 related to the sale of the Company's Continental Europe Operations, which was completed on December 29, 2021. Also included were gains of $7 on credit derivatives driven by a decrease in credit spreads.

Year ended December 31, 2020

Gross gains and losses on sales were primarily driven by issuer-specific sales of corporate securities and tax-exempt municipal bonds, rebalancing within the foreign government sector, and sales of U.S. treasury securities for duration and/or liquidity management.

Equity securities net losses were driven by mark-to-market losses due to the decline in equity market levels in the first quarter and losses incurred on sales across multiple issuers as the Company reduced its exposure to equity securities, partially offset by mark-to-market gains on certain preferred equities.

Other, net gains are primarily due to $75 of realized gains on terminated derivatives used to hedge against a decline in equity market levels and $21 of gains on interest rate derivatives due to a decline in interest rates. These gains were partially offset by

a loss of $48, before tax, on the sale of the Company’s Continental Europe Operations which the Company agreed to sell in September of 2020.

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ, and in the past have differed, from those estimates.

The Company has identified the following estimates as critical in that they involve a higher degree of judgment and are subject to a significant degree of variability:

•property and casualty insurance product reserves, net of reinsurance;

•group benefit LTD reserves, net of reinsurance;

•evaluation of goodwill for impairment;

•valuation of investments and derivative instruments including evaluation of credit losses on fixed maturities, AFS and ACL on mortgage loans; and

•contingencies relating to corporate litigation and regulatory matters.

Table of Contents Index to MD&A

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

In developing these estimates management makes subjective and complex judgments that are inherently uncertain and subject to material change as facts and circumstances develop. Although variability is inherent in these estimates, management believes the amounts provided are appropriate based upon the

facts available upon compilation of the financial statements. Certain of these estimates are particularly sensitive to market conditions, and deterioration and/or volatility in the worldwide debt or equity markets could have a material impact on the Consolidated Financial Statements.

|PROPERTY & CASUALTY INSURANCE PRODUCT RESERVES, NET OF REINSURANCE

P&C Loss and Loss Adjustment Expense Reserves, Net of Reinsurance, by Segment as of December 31, 2021

Loss and LAE Reserves, Net of Reinsurance as of December 31, 2021

Automobile physical damage 14 40 — 54 0.2%

[1]Commercial Lines policy packages that include property and general liability coverages are generally referred to as the package line of business.

Table of Contents Index to MD&A

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

For descriptions of the coverages provided under the lines of business shown above, see Part I - Item1, Business.

Overview of Reserving for Property and Casualty Insurance Claims

It typically takes many months or years to pay claims incurred under a property and casualty insurance product; accordingly, the Company must establish reserves at the time the loss is incurred. Most of the Company’s policies provide for occurrence-based coverage where the loss is incurred when a claim event happens like an automobile accident, house or building fire or injury to an employee under a workers’ compensation policy. Some of the Company's policies, mostly for directors and officers insurance and errors and omissions insurance, are claims-made policies where the loss is incurred in the period the claim event is reported to the Company even if the loss event itself occurred in an earlier period.

Loss and loss adjustment expense reserves provide for the estimated ultimate costs of paying claims under insurance policies written by the Company, less amounts paid to date. These reserves include estimates for both claims that have been reported and those that have not yet been reported, and include estimates of all expenses associated with processing and settling these claims. Case reserves are established by a claims handler on each individual claim and are adjusted as new information becomes known during the course of handling the claim. Incurred but not reported (“IBNR”) reserves represent the difference between the estimated ultimate cost of all claims and the actual loss and loss adjustment expenses reported to the Company by claimants (“reported losses”). Reported losses represent cumulative loss and loss adjustment expenses paid plus case reserves for outstanding reported claims. For most lines, Company actuaries evaluate the total reserves (IBNR and case reserves) on an accident year basis. An accident year is the calendar year in which a loss is incurred, or, in the case of claims-made policies, the calendar year in which a loss is reported. For certain lines acquired from the Navigators Group book of business, total reserves are evaluated on a policy year basis and then converted to accident year. A policy year is the calendar year in which a policy incepts.

Factors that Change Reserve Estimates- Reserve estimates can change over time because of unexpected changes in the external environment. Inflation in claim costs, such as with medical care, hospital care, automobile parts, wages and home and building repair, would cause claims to settle for more than they are initially reserved. Changes in the economy can cause an increase or decrease in the number of reported claims (claim frequency). For example, an improving economy could result in more automobile miles driven and a higher number of automobile reported claims, or a change in economic conditions can lead to more or less workers’ compensation reported claims. An increase in the number or percentage of claims litigated can increase the average settlement amount per claim (claim severity). Changes in the judicial environment can affect interpretations of damages and how policy coverage applies which could increase or decrease claim severity. Over time, judges or juries in certain jurisdictions may be more inclined to determine liability and award damages. New legislation can also change how damages are defined or change the statutes of limitations for the filing of civil suits, resulting in greater claim frequency or severity. In addition, new

types of injuries may arise from exposures not contemplated when the policies were written. Past examples include pharmaceutical products, silica, lead paint, sexual molestation and sexual abuse and construction defects.

Reserve estimates can also change over time because of changes in internal Company operations. A delay or acceleration in handling claims may signal a need to increase or reduce reserves from what was initially estimated. New lines of business may have loss development patterns that are not well established. Changes in the geographic mix of business, changes in the mix of business by industry and changes in the mix of business by policy limit or deductible can increase the risk that losses will ultimately develop differently than the loss development patterns assumed in our reserving. In addition, changes in the quality of risk selection in underwriting and changes in interpretations of policy language could increase or decrease ultimate losses from what was assumed in establishing the reserves.

In the case of assumed reinsurance, all of the above risks apply. The Company assumes property and casualty risks from other insurance companies as part of its Global Re business acquired from Navigators Group and from certain pools and associations. Global Re, which is a part of the global specialty business, mostly assumes property, casualty and specialty risks. Changes in the case reserving and reporting patterns of insurance companies ceding to The Hartford can create additional uncertainty in estimating the reserves. Due to the inherent complexity of the assumptions used, final claim settlements may vary significantly from the present estimates of direct and assumed reserves, particularly when those settlements may not occur until well into the future.

Reinsurance Recoverables- Through both facultative and treaty reinsurance agreements, the Company cedes a share of the risks it has underwritten to other insurance companies. The Company records reinsurance recoverables for losses and loss adjustment expenses ceded to its reinsurers representing the anticipated recovery from reinsurers of unpaid claims, including IBNR.

The Company estimates the portion of losses and loss adjustment expenses to be ceded based on the terms of any applicable facultative and treaty reinsurance, including an estimate of IBNR for losses that will ultimately be ceded.

The Company provides an allowance for uncollectible reinsurance, reflecting management’s best estimate of reinsurance cessions that may be uncollectible in the future due to reinsurers’ unwillingness or inability to pay. The allowance for uncollectible reinsurance comprises an ACL and an allowance for disputed balances. The ACL primarily considers the credit quality of the Company's reinsurers while the allowance for disputes considers recent outcomes in arbitration and litigation in disputes between reinsurers and cedants and recent commutation activity between reinsurers and cedants that may signal how the Company’s own reinsurance claims may settle. Where its reinsurance contracts permit, the Company secures funding of future claim obligations with various forms of collateral, including irrevocable letters of credit, secured trusts, funds held accounts and group-wide offsets. The allowance for uncollectible reinsurance was $96 as of December 31, 2021, comprised of $42 related to Commercial Lines, $1 related to

Table of Contents Index to MD&A

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

Personal Lines and $53 related to Property & Casualty Other Operations.

The Company’s estimate of reinsurance recoverables, net of an allowance for uncollectible reinsurance, is subject to similar risks and uncertainties as the estimate of the gross reserve for unpaid losses and loss adjustment expenses for direct and assumed exposures.

Review of Reserve Adequacy- The Hartford regularly reviews the appropriateness of reserve levels at the line of business or more detailed level, taking into consideration the variety of trends that impact the ultimate settlement of claims. For Property & Casualty Other Operations, asbestos and environmental (“Run-off A&E”) reserves are reviewed by type of event rather than by line of business.

Reserve adjustments, which may be material, are reflected in the operating results of the period in which the adjustment is determined to be necessary. In the judgment of management, information currently available has been properly considered in establishing the reserves for unpaid losses and loss adjustment expenses and in recording the reinsurance recoverables for ceded unpaid losses.

Reserving Methodology

The following is a discussion of the reserving methods used for the Company's property and casualty lines of business other than asbestos and environmental.

Reserves are set by line of business within the operating segments. A single line of business may be written in more than one segment. Lines of business for which reported losses emerge over a long period of time are referred to as long-tail lines of business. Lines of business for which reported losses emerge more quickly are referred to as short-tail lines of business. The Company’s shortest-tail lines of business are homeowners, commercial property, marine and automobile physical damage. The longest tail lines of business include workers’ compensation, general liability, professional liability and assumed reinsurance. For short-tail lines of business, emergence of paid losses and case reserves is credible and likely indicative of ultimate losses. For long-tail lines of business, emergence of paid losses and case reserves is less credible in the early periods after a given accident year and, accordingly, may not be indicative of ultimate losses.

Use of Actuarial Methods and Judgments- The Company’s reserving actuaries regularly review reserves for both current and prior accident years using the most current claim data. A variety of actuarial methods and judgments are used for most lines of business to arrive at selections of estimated ultimate losses and loss adjustment expenses. New methods may be added for specific lines over time to inform these selections where appropriate. The reserve selections incorporate input, as appropriate, from claims personnel, pricing actuaries and operating management about reported loss cost trends and other factors that could affect the reserve estimates. Most reserves are reviewed fully each quarter, including loss and loss adjustment expense reserves for homeowners, commercial property, marine property, automobile physical damage, automobile liability, package property business, and workers’ compensation. Other reserves, including most general liability and professional liability lines, are reviewed semi-annually. Certain additional reserves are also reviewed semi-

annually or annually, including reserves for losses incurred in accident years older than twelve years for Personal Lines and older than twenty years for Commercial Lines, as well as reserves for bond, assumed reinsurance, latent exposures such as construction defects, and unallocated loss adjustment expenses. For reserves that are reviewed semi-annually or annually, management monitors the emergence of paid and reported losses in the intervening quarters and, if necessary, performs a reserve review to determine whether the reserve estimate should change.

An expected loss ratio is used in initially recording the reserves for both short-tail and long-tail lines of business. This expected loss ratio is determined by starting with the average loss ratio of recent prior accident years and adjusting that ratio for the effect of expected changes to earned pricing, loss frequency and severity, mix of business, ceded reinsurance and other factors. For short-tail lines, IBNR for the current accident year is initially recorded as the product of the expected loss ratio for the period, earned premium for the period and the proportion of losses expected to be reported in future calendar periods for the current accident period. For long-tailed lines, IBNR reserves for the current accident year are initially recorded as the product of the expected loss ratio for the period and the earned premium for the period, less reported losses for the period.

As losses emerge or develop in periods subsequent to a given accident year, reserving actuaries use other methods to estimate ultimate unpaid losses in addition to the expected loss ratio method. These primarily include paid and reported loss development methods, frequency/severity techniques and the Bornhuetter-Ferguson method (a combination of the expected loss ratio and paid development or reported development method). Within any one line of business, the methods that are given more influence vary based primarily on the maturity of the accident year, the mix of business and the particular internal and external influences impacting the claims experience or the methods. The output of the reserve reviews are reserve estimates representing a range of actuarial indications.

Reserve Discounting- Most of the Company’s property and casualty insurance product reserves are not discounted. However, the Company has discounted liabilities funded through structured settlements and has discounted a portion of workers’ compensation reserves that have a fixed and determinable payment stream. For further discussion of these discounted liabilities, see Note 1 - Basis of Presentation and Significant Accounting Policies of Notes to Consolidated Financial Statements.

Differences Between GAAP and Statutory Basis Reserves- As of December 31, 2021 and 2020, U.S. property and casualty insurance product reserves for losses and loss adjustment expenses, net of reinsurance recoverables, reported under U.S. GAAP were lower than net reserves reported on a statutory basis, primarily due to reinsurance recoverables on two ceded retroactive reinsurance agreements that are recorded as a reduction of other liabilities under statutory accounting. One of the retroactive reinsurance agreements covers substantially all adverse development on asbestos and environmental reserves subsequent to 2016, up to a $1.5 billion limit, and the other covered adverse development on Navigators Insurers' existing net loss and allocated loss adjustment reserves as of December 31, 2018, up to a $300 limit. Under both agreements,

Table of Contents Index to MD&A

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

the Company cedes to NICO, a subsidiary of Berkshire Hathaway Inc. ("Berkshire").

Reserving Methods by Line of Business- Apart from Run-off A&E which is discussed in the following section on Property & Casualty Other Operations, below is a general discussion of which reserving methods are preferred by line of business. Because the actuarial estimates are generated at a

much finer level of detail than line of business (e.g., by distribution channel, coverage, accident period), other methods than those described for the line of business may also be employed for a coverage and accident year within a line of business. Also, as circumstances change, the methods that are given more influence will change.

Preferred Reserving Methods by Line of Business

Table of Contents Index to MD&A

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

The recorded reserve for losses and loss adjustment expenses represents the Company's best estimate of the ultimate settlement amount of unpaid losses and loss adjustment expenses. In applying judgment, the best estimate is selected after considering the estimates derived from a number of actuarial methods, giving more weight to those methods deemed more predictive of ultimate unpaid losses and loss adjustment expenses. The Company does not produce a statistical range or confidence interval of reserve estimates and, since reserving methods with more credibility are given greater weight, the selected best estimate may differ from the mid-point of the various estimates produced by the actuarial methods used.

Assumptions used in arriving at the selected actuarial indications consider a number of factors, including the immaturity of emerged claims in recent accident years, emerging trends in the recent past, and the level of volatility within each line of business.

Adjustments to reserves of prior accident years are referred to as “prior accident year development”. Increases in previous estimates of ultimate loss costs are referred to as either an increase in prior accident year reserves or as unfavorable reserve development. Decreases in previous estimates of ultimate loss costs are referred to as either a decrease in prior accident year reserves or as favorable reserve development. Reserve development can influence the comparability of year over year underwriting results.

For a discussion of changes to reserve estimates recorded in 2021, see Note 12 - Reserve for Unpaid Losses and Loss Adjustment Expenses in the Notes to Consolidated Financial Statements.

Current Trends Contributing to Reserve Uncertainty

The Hartford is a multi-line company in the property and casualty insurance business. The Hartford is, therefore, subject to reserve uncertainty stemming from changes in loss trends and other conditions which could become material at any point in time. As market conditions and loss trends develop, management must assess whether those conditions constitute a long-term trend that should result in a reserving action (i.e., increasing or decreasing the reserve).

General liability- Within Commercial Lines and Property & Casualty Other Operations, the Company has exposure to general liability claims, including from bodily injury, property damage and product liability. Reserves for these exposures can be particularly difficult to estimate due to the long development pattern and uncertainty about how cases will settle. In particular, the Company has exposure to bodily injury claims that is the result of long-term or continuous exposure to harmful products or substances. Examples include, but are not limited to, pharmaceutical products, silica, talcum powder, per-and polyfluoroalkyl substances ("PFAS"), head injuries and lead paint. The Company also has exposure to claims from construction defects, where property damage or bodily injury from negligent construction is alleged. In addition, the Company has exposure to claims asserted against religious institutions, and other organizations, including the Boy Scouts of America, relating to sexual molestation and sexual abuse. For additional information related to the Company's settlement agreement with

the Boy Scouts of America, see Note 12 - Reserve for Unpaid Losses and Loss Adjustment Expenses in the Notes to Consolidated Financial Statements. State “reviver” statutes, extending statutes of limitations for certain sexual molestation and sexual abuse claims, could result in additional litigation or could result in unexpected sexual molestation and sexual abuse losses. Such exposures may involve potentially long latency periods and may implicate coverage in multiple policy periods, which can raise complex coverage issues with significant effects on the ultimate scope of coverage. Such exposures may also be impacted by insured bankruptcies. These factors make reserves for such claims more uncertain than other bodily injury or property damage claims. With regard to these exposures, the Company monitors trends in litigation, the external environment including legislation, the similarities to other mass torts and the potential impact on the Company’s reserves. Additionally, uncertainty in estimated claim severity causes reserve variability, particularly with respect to changes in internal claim handling and case reserving practices.

Workers’ compensation- Included in both small commercial and in middle & large commercial, workers’ compensation is the Company’s single biggest line of business and the property and casualty line of business with the longest pattern of loss emergence. To the extent that patterns in the frequency of settlement payments deviate from historical patterns, loss reserve estimates would be less reliable. Medical costs make up approximately 50% of workers’ compensation payments. As such, reserve estimates for workers’ compensation are particularly sensitive to changes in medical inflation, the changing use of medical care procedures and changes in state legislative and regulatory environments. In addition, a deteriorating economic environment can reduce the ability of an injured worker to return to work and lengthen the time a worker receives disability benefits. In National Accounts, reserves for large deductible workers’ compensation insurance require estimating losses attributable to the deductible amount that will be paid by the insured; if such losses are not paid by the insured due to financial difficulties, the Company is contractually liable.

Commercial Lines automobile- Uncertainty in estimated claim severity causes reserve variability for commercial automobile losses including reserve variability due to changes in internal claim handling and case reserving practices as well as due to changes in the external environment.

Directors' and officers' insurance- Uncertainty regarding the number and severity of security class action suits can result in reserve volatility for directors' and officers' insurance claims. Additionally, the Company’s exposure to losses under directors’ and officers’ insurance policies, both domestically and internationally, is primarily in excess layers, making estimates of loss more complex.

Personal Lines automobile- While claims emerge over relatively shorter periods, estimates can still vary due to a number of factors, including uncertain estimates of frequency and severity trends. Severity trends are affected by changes in internal claim handling and case reserving practices as well as by changes in the external environment, such as due to inflation in labor and materials because of supply chain disruptions affecting repair costs. Changes in claim practices increase the uncertainty in the interpretation of case reserve data, which

Table of Contents Index to MD&A

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

increases the uncertainty in recorded reserve levels. Severity trends have increased in recent accident years, in part driven by more expensive parts associated with new automobile technology, causing additional uncertainty about the reliability of past patterns. In addition, the introduction of new products and class plans has led to a different mix of business by type of insured than the Company experienced in the past. Such changes in mix increase the uncertainty of the reserve projections, since historical data and reporting patterns may not be applicable to the new business.

Assumed reinsurance- While the pricing and reserving processes can be challenging and idiosyncratic for insurance companies, the inherent uncertainties of setting prices and estimating such reserves are even greater for the reinsurer. This is primarily due to the longer time between the date of an occurrence and the reporting of claims to the reinsurer, the diversity of development patterns among different types of reinsurance treaties or contracts, the necessary reliance on the ceding companies for information regarding reported claims and differing pricing and reserving practices among ceding companies. In addition, trends that have affected development of liabilities in the past may not necessarily occur or impact liability development in the same manner or to the same degree in the future. As a result, actual losses and LAE may deviate, perhaps substantially, from the expected estimates.

International business- In addition to several of the line-specific trends listed above, the International business acquired through the Navigators Group book of business may have additional uncertainty due to geopolitical, foreign currency, and trade dispute risks.

COVID-19 impacts- As further explained under the "Impact of COVID-19 on our financial condition, results of operations and liquidity" section of this MD&A, the Company incurred $31 of COVID-19 claims in 2021 within P&C, including in workers' compensation and financial lines. Under workers’ compensation, we have experienced a continuation of COVID-19 incurred losses, particularly due to laws or directives in certain states that require coverage of COVID-19 claims for health care and other essential workers based on a presumption that they contracted the virus while working. Under financial lines, we have experienced COVID-19 related claims under employment practices liability insurance policies. These claims tend to be low severity and we are monitoring emerging trends related to return to work and vaccine mandates. We continue to monitor exposure under director's and officer's insurance policies.

In addition to the direct impacts of COVID-19 mentioned above, we are monitoring for indirect impacts as well. This past year we have seen inflationary pressure on building material and labor costs due to supply chain disruption because of the pandemic. This has the potential to impact homeowners and commercial property severity and lengthen reporting patterns due to claim settlement delays. Supply chain disruption as a result of the pandemic has also had an impact on the automobile industry impacting physical damage severities.

Reserve estimates for COVID-19 claims are difficult to estimate. In establishing reserves for COVID-19 incurred claims through December 31, 2021, we have provided IBNR at a higher percentage of ultimate estimated incurred losses than usual as we expect longer claim reporting patterns given the effects of COVID-19. For example, we expect longer delays than usual between the time a worker is treated and the date the claim is

eventually submitted for workers' compensation coverage. Reserve estimates for directors’ and officers’ (“D&O”), errors and omissions ("E&O") and employment practices liability are subject to significant uncertainty given that estimates must be made of the expected ultimate severity of claims that have recently been reported. Changes in the legal environment and litigation process, including but not limited to court delays and closings, may also have potential impacts on development patterns for liability lines.

Catastrophes-Within Commercial Lines and Personal Lines, the Company is exposed to incurred losses from catastrophe events, primarily for damage to property. Reserves for hurricanes, tropical storms, tornado/hail, wildfires, earthquakes and other catastrophe events are subject to significant uncertainty about the number and average severity of claims arising from those events, particularly in cases where the event occurs near the end of a financial reporting period when there is limited information about the extent of damages. For example, after a catastrophe event, it may take a period of time before we are able to access the impacted areas limiting the ability of our claims adjusting staff to inspect losses, make estimates and determine the damages that are covered by the policy. To estimate catastrophe losses, we consider information from claim notices received to date, third party data, visual images of the affected area where we have exposures and our own historical experience of loss reporting patterns for similar events.

Impact of Key Assumptions on Reserves

As stated above, the Company’s practice is to estimate reserves using a variety of methods, assumptions and data elements within its reserve estimation. The Company does not use statistical loss distributions or confidence levels in the process of determining its reserve estimate and, as a result, does not disclose reserve ranges.

Across most lines of business, the most important reserve assumptions are future loss development factors applied to paid or reported losses to date. The trend in loss cost frequency and severity is also a key assumption, particularly in the most recent accident years, where loss development factors are less credible.

The following discussion discloses possible variation from current estimates of loss reserves due to a change in certain key indicators of potential losses. For automobile liability lines in both Personal Lines and Commercial Lines, the key indicator is the annual loss cost trend, particularly the severity trend component of loss costs. For workers’ compensation and general liability, loss development patterns are a key indicator, particularly for more mature accident years. For workers’ compensation, paid loss development patterns have been impacted by medical cost inflation and other changes in loss cost trends. For general liability, incurred loss development patterns have been impacted by, among other things, emergence of new types of claims (e.g., PFAS claims) and a shift in the mixture between smaller, more routine claims and larger, more complex claims.

Each of the impacts described below is estimated individually, without consideration for any correlation among key indicators or among lines of business. Therefore, it would be inappropriate to take each of the amounts described below and add them

Table of Contents Index to MD&A

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

together in an attempt to estimate volatility for the Company’s reserves in total. For any one reserving line of business, the estimated variation in reserves due to changes in key indicators is a reasonable estimate of potential reserve development that may occur in the future, likely over a period of several calendar years. The variation discussed is not meant to be a worst-case scenario, and, therefore, it is possible that future variation may be more than the amounts discussed below. Moreover, the variation discussed does not represent a complete statistical range of potential reserve outcomes, and factors exist beyond the key indicators considered which have the potential to drive additional variation to the Company's reserves.

Reserving for Asbestos and Environmental Claims

How A&E Reserves are Set- The process for establishing reserves for asbestos and environmental claims first involves estimating the required reserves gross of ceded reinsurance and then estimating reinsurance recoverables.

In establishing reserves for gross asbestos claims, the Company evaluates its insureds’ estimated liabilities for such claims by examining exposures for individual insureds and assessing how coverage applies. The Company considers a variety of factors, including the jurisdictions where underlying claims have been brought, past, pending and anticipated future claim activity, the level of plaintiff demands, disease mix, past settlement values of similar claims, dismissal rates, allocated loss adjustment expense, and potential impact of other defendants being in bankruptcy.

Similarly, the Company reviews exposures to establish gross environmental reserves. The Company considers several factors in estimating environmental liabilities, including historical values of similar claims, the number of sites involved, the insureds’ alleged activities at each site, the alleged environmental damage, the respective shares of liability of

potentially responsible parties, the appropriateness and cost of remediation, the nature of governmental enforcement activities or mandated remediation efforts and potential impact of other defendants being in bankruptcy.

After evaluating its insureds’ probable liabilities for asbestos and/or environmental claims, the Company evaluates the insurance coverage in place for such claims. The Company considers its insureds’ total available insurance coverage, including the coverage issued by the Company. The Company also considers relevant judicial interpretations of policy language, the nature of how policy limits are enforced on multi-year policies and applicable coverage defenses or determinations, if any.

The estimated liabilities of insureds and the Company’s exposure to the insureds depends heavily on an analysis of the relevant legal issues and litigation environment. This analysis is conducted by the Company’s lawyers and is subject to applicable privileges.

For both asbestos and environmental reserves, the Company also analyzes its historical paid and reported losses and expenses year by year, to assess any emerging trends, fluctuations or characteristics suggested by the aggregate paid and reported activity. The historical losses and expenses are analyzed on both a direct basis and net of reinsurance.

Once the gross ultimate exposure for indemnity and allocated loss adjustment expense is determined for its insureds by each policy year, the Company calculates its ceded reinsurance projection based on any applicable facultative and treaty reinsurance and the Company’s experience with reinsurance collections. See the section that follows entitled A&E Adverse Development Cover that discusses the impact the reinsurance agreement with NICO may have on future adverse development of asbestos and environmental reserves, if any.

Uncertainties Regarding Adequacy of A&E Reserves- A number of factors affect the variability of estimates for gross asbestos and environmental reserves including assumptions with respect to the frequency of claims, the average severity of those claims settled with payment, the dismissal rate of claims with no payment, resolution of coverage disputes with our policyholders and the expense to indemnity ratio. Reserve estimates for gross asbestos and environmental reserves are subject to greater variability than reserve estimates for more traditional exposures.

The process of estimating asbestos and environmental reserves remains subject to a wide variety of uncertainties, which are detailed in Note 15 - Commitments and Contingencies of Notes to Consolidated Financial Statements. The Company believes that its current asbestos and environmental reserves are appropriate. Future developments could continue to cause the Company to change its estimates of its gross asbestos and environmental reserves. Losses ceded under the adverse development cover ("A&E ADC") with NICO in excess of the ceded premium paid of $650 have resulted in a deferred gain resulting in a timing difference between when gross reserves are increased and when reinsurance recoveries are recognized. This timing difference results in a charge to net income until such periods when the recoveries are recognized. Consistent with past practice, the Company will continue to monitor its reserves in Property & Casualty Other Operations regularly,

Table of Contents Index to MD&A

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

including its annual reviews of asbestos liabilities, reinsurance recoverables, the allowance for uncollectible reinsurance, and environmental liabilities. Where future developments indicate, we will make appropriate adjustments to the reserves at that time.

Total P&C Insurance Product Reserves Development

In the opinion of management, based upon the known facts and current law, the reserves recorded for the Company’s property

and casualty insurance products at December 31, 2021 represent the Company’s best estimate of its ultimate liability for unpaid losses and loss adjustment expenses related to losses covered by policies written by the Company. However, because of the significant uncertainties surrounding reserves, it is possible that management’s estimate of the ultimate liabilities for these claims may change in the future and that the required adjustment to currently recorded reserves could be material to the Company’s results of operations and liquidity.

Rollforward of Property and Casualty Insurance Product Liabilities for Unpaid Losses and LAE for the Year Ended December 31, 2021

Provision for unpaid losses and loss adjustment expenses

Current accident year before catastrophes 5,407 1,840 — 7,247

Current accident year ("CAY") catastrophes 496 168 — 664

Foreign currency adjustment 2 — — 2

Earned premiums and fee income $ 9,575 $ 2,986

Loss and loss expense paid ratio [2] 45.1 62.5

Loss and loss expense incurred ratio 63.4 63.1

Prior accident year development (pts) [3] 1.5 (4.9)

[1]Prior accident year development does not include the benefit of a portion of losses ceded under the Navigators and A&E ADCs which, under retroactive reinsurance accounting, is deferred and is recognized over the period the ceded losses are recovered in cash from NICO. For additional information regarding the two adverse development cover reinsurance agreements, refer to Note 12 - Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Consolidated Financial Statements.

[2]The “loss and loss expense paid ratio” represents the ratio of paid losses and loss adjustment expenses to earned premiums and fee income.

[3]“Prior accident year development (pts)” represents the ratio of prior accident year development to earned premiums.

Table of Contents Index to MD&A

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

Commercial Lines Personal Lines Total

Hurricanes and Tropical Storms 151 43 194

Losses ceded to the aggregate catastrophe treaty [2] (29) (10) (39)

Catastrophes before assumed reinsurance 439 168 607

Global assumed reinsurance business [3] 57 — 57

[1]Includes catastrophe losses from the February winter storms in Texas and other areas within Commercial Lines and Personal Lines of $206 and $24, respectively, gross of reinsurance, and $151 and $18, respectively, net of reinsurance under the Company's per occurrence property catastrophe treaty covering events other than earthquakes and named hurricanes and tropical storms. The reinsurance covers 70% of up to $250 of losses in excess of $100 from such events occurring within a seven day time period, subject to a $50 annual aggregate deductible. These recoveries do not inure to the benefit of the aggregate property catastrophe treaty reinsurers. For further information on the treaty, refer to Enterprise Risk Management — Insurance Risk section of this MD&A.

[2]For further information on the aggregate catastrophe treaty, refer to Enterprise Risk Management — Insurance Risk section of this MD&A.

[3]Catastrophe losses incurred on global assumed reinsurance business are not covered under the Company's aggregate property catastrophe treaty. For further information on the treaty, refer to Enterprise Risk Management — Insurance Risk section of this MD&A.

Workers’ compensation $ (190) $ — $ — $ (190)

Workers’ compensation discount accretion 35 — — 35

Marine 1 — — 1

Package business (91) — — (91)

Commercial property (26) — — (26)

Professional liability (2) — — (2)

Assumed reinsurance (6) — — (6)

Automobile liability 9 (90) — (81)

Homeowners — 3 — 3

Net asbestos and environmental reserves — — — —

Uncollectible reinsurance (5) — (1) (6)

Other reserve re-estimates, net (6) — 48 42

Prior accident year development before change in deferred gain 50 (144) 47 (47)

Total prior accident year development $ 141 $ (144) $ 202 $ 199

Table of Contents Index to MD&A

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

Rollforward of Property and Casualty Insurance Product Liabilities for Unpaid Losses and LAE for the Year Ended December 31, 2020

Provision for unpaid losses and loss adjustment expenses

Current accident year before catastrophes 5,493 1,695 — 7,188

Current accident year catastrophes 397 209 — 606

Net reserves transferred to liabilities held for sale (45) — — (45)

Foreign currency adjustment 14 — — 14

Earned premiums and fee income $ 8,940 $ 3,042

Loss and loss expense paid ratio [3] 48.6 58.9

Loss and loss expense incurred ratio 66.5 48.7

Prior accident year development (pts) [4] 0.5 (14.6)

[1]Includes a cumulative effect adjustment of $1 and $(1) for Commercial Lines and Property & Casualty Other Operations respectively, representing an adjustment to the ACL recorded on adoption of accounting guidance for credit losses on January 1, 2020. See Note 1 - Basis of Presentation and Significant Accounting Policies of Notes to Consolidated Financial Statements for further information.

[2]Prior accident year development does not include the benefit of a portion of losses ceded under the Navigators and A&E ADCs which, under retroactive reinsurance accounting, is deferred and is recognized over the period the ceded losses are recovered in cash from NICO. For additional information regarding the two adverse development cover reinsurance agreements, refer to Note 12 - Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Consolidated Financial Statements.

[3]The “loss and loss expense paid ratio” represents the ratio of paid losses and loss adjustment expenses to earned premiums and fee income.

[4]“Prior accident year development (pts)” represents the ratio of prior accident year development to earned premiums.

Commercial Lines Personal Lines Total

Hurricanes and Tropical Storms 96 51 147

Other 8 — 8

In December, 2019, the judge overseeing the bankruptcy of PG&E approved an $11 billion settlement of insurance subrogation claims to resolve all such claims arising from the 2017 Northern California wildfires and 2018 Camp wildfire. That settlement was contingent upon, among other things, the judge entering an order confirming PG&E’s chapter 11 bankruptcy plan (“PG&E Plan”) incorporating the settlement agreement. On June 20, 2020, the bankruptcy court judge approved the PG&E

Plan and PG&E subsequently transferred the $11 billion settlement amount to a trust designed to allocate and distribute the settlement among subrogation holders, including certain of the Company’s insurance subsidiaries. In the second quarter of 2020, the Company recorded an estimated $289 subrogation benefit though the ultimate amount it collects will depend on how the Company’s ultimate paid claims subject to subrogation compare to other insurers’ ultimate paid claims subject to

Table of Contents Index to MD&A

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

subrogation. In 2020, the Company received distributions, net of attorney costs, of $227.

Workers’ compensation $ (110) $ — $ — $ (110)

Workers’ compensation discount accretion 35 — — 35

Marine 3 — — 3

Package business (58) — — (58)

Commercial property (4) — — (4)

Professional liability (14) — — (14)

Assumed reinsurance (6) — — (6)

Automobile liability 27 (61) — (34)

Homeowners — 7 — 7

Net asbestos and environmental reserves — — (2) (2)

Uncollectible reinsurance — — (8) (8)

Other reserve re-estimates, net — (4) 58 54

Total prior accident year development $ 44 $ (438) $ 258 $ (136)

Table of Contents Index to MD&A

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

Rollforward of Property and Casualty Insurance Product Liabilities for Unpaid Losses and LAE for the Year Ended December 31, 2019

Navigators Group Acquisition 2,001 — — 2,001

Provision for unpaid losses and loss adjustment expenses

Current accident year before catastrophes 4,913 2,087 — 7,000

Current accident year catastrophes 323 140 — 463

Prior accident year development [1] (44) (42) 21 (65)

Foreign currency adjustment (1) — — (1)

Earned premiums and fee income $ 8,325 $ 3,235

Loss and loss expense paid ratio [2] 50.0 74.2

Loss and loss expense incurred ratio 62.6 68.3

Prior accident year development (pts) [3] (0.5) (1.3)

[2]The “loss and loss expense paid ratio” represents the ratio of paid losses and loss adjustment expenses to earned premiums and fee income.

[3]“Prior accident year development (pts)” represents the ratio of prior accident year development to earned premiums.

Commercial Lines Personal Lines Total

Other 1 — 1

Table of Contents Index to MD&A

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

Workers’ compensation $ (120) $ — $ — $ (120)

Workers’ compensation discount accretion 33 — — 33

General liability 61 — — 61

Marine 8 — — 8

Package business (47) — — (47)

Commercial property (11) — — (11)

Professional liability 29 — — 29

Bond (3) — — (3)

Assumed reinsurance 3 — — 3

Automobile liability 27 (38) — (11)

Homeowners — 3 — 3

Net asbestos and environmental reserves — — — —

Catastrophes (40) (2) — (42)

Uncollectible reinsurance (5) — (25) (30)

Other reserve re-estimates, net 5 (5) 46 46

Total prior accident year development (60) (42) 21 (81)

Total prior accident year development $ (44) $ (42) $ 21 $ (65)

For discussion of the factors contributing to unfavorable (favorable) for the prior accident year reserve development 2021, 2020, and 2019 periods, refer to Note 12 - Reserve for

Unpaid Losses and Loss Adjustment Expenses of Notes to Consolidated Financial Statements.

|PROPERTY & CASUALTY OTHER OPERATIONS

Net reserves and reserve activity in Property & Casualty Other Operations are categorized and reported as asbestos, environmental, and “all other”. The “all other” category of reserves covers a wide range of insurance and assumed reinsurance coverages, including, but not limited to, potential liability for construction defects, lead paint, silica, pharmaceutical products, head injuries, sexual molestation and sexual abuse and other long-tail liabilities. In addition to various insurance and assumed reinsurance exposures, "all other" includes unallocated loss adjustment expense reserves. "All other" also includes the Company’s allowance for uncollectible reinsurance. When the Company commutes a ceded reinsurance contract or settles a ceded reinsurance dispute, net reserves for the related cause of loss (including asbestos, environmental or all other) are increased for the portion of the

allowance for uncollectible reinsurance attributable to that commutation or settlement.

HIG US Equity

HIG · 10-K · period ended 2021-12-31

Item 7.

HIG US Equity☆

HIG · 10-K · period ended 2021-12-31

Item 7.

HIG US Equity