# HARTFORD INSURANCE GROUP, INC. (HIG) FY 2025 MD&A

Verbatim Item 7 Management's Discussion and Analysis from HARTFORD INSURANCE GROUP, INC.'s 10-K for fiscal year 2025.

SEC filing source: https://www.sec.gov/Archives/edgar/data/874766/000087476626000012/hig-20251231.htm
Accession: 0000874766-26-000012
Filing date: 2026-02-20
Report date: 2025-12-31
Extracted from Item 7 to the first post-MD&A boundary after HTML sanitization. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/HIG/
All MD&A years: /company/HIG/mda/
Previous year: /company/HIG/mda/fy2024/ (FY 2024)

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

of December 31, 2025, the U.S. qualified defined benefit pension plan is fully funded and in an asset position. For further discussion of pension and other postretirement benefit obligations, see Note 18 - Employee Benefit Plans of Notes to Consolidated Financial Statements.

Derivative Commitments

Certain of the Company’s derivative agreements contain provisions that are tied to the financial strength ratings, as set by nationally recognized statistical rating agencies, of the individual legal entity that entered into the derivative agreement. If the legal entity’s financial strength were to fall below certain ratings, the counterparties to the derivative agreements could terminate agreements and demand immediate settlement of the outstanding net derivative positions transacted under each agreement. For further information, refer to Note 14 - Commitments and Contingencies of Notes to Consolidated Financial Statements.

As of December 31, 2025, no derivative positions would be subject to immediate termination in the event of a downgrade of one level below the current financial strength ratings. This could change as a result of changes in our hedging activities or to the extent changes in contractual terms are negotiated.

Insurance Operations

While subject to variability period to period, underwriting and investment cash flows continue to provide sufficient liquidity to meet anticipated demands.

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

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

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

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

Property & Casualty Operations

[[GREPCENT_TABLE]]
[["","As of"],["","December 31, 2025"],["Fixed maturities","$","37,816"],["Short-term investments","2,104"],["Cash","117"],["Less: Derivative collateral","65"],["Total","$","39,972"]]
[[/GREPCENT_TABLE]]

Property & Casualty operations invested assets also include $121 in equity securities, $5.3 billion in mortgage loans and $4.5 billion in limited partnerships and other alternative investments.

Employee Benefits Operations

[[GREPCENT_TABLE]]
[["","As of"],["","December 31, 2025"],["Fixed maturities","$","8,198"],["Short-term investments","365"],["Cash","\u2014"],["Less: Derivative collateral","17"],["Total","$","8,546"]]
[[/GREPCENT_TABLE]]

Employee Benefits operations invested assets also include $23 in equity securities, $1.6 billion in mortgage loans and $1.2 billion in limited partnerships and other alternative investments.

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

Property & Casualty reserves for unpaid losses and loss adjustment expenses as of December 31, 2025 were $38.2 billion and net of reinsurance and other recoverables were $31.4 billion. Reserves for Property & Casualty unpaid losses and loss adjustment expenses include case reserves and IBNR reserves. The ultimate amount to be paid to settle both case and IBNR reserves is an estimate, subject to significant uncertainty. The actual amount to be paid is not finally determined until the Company reaches a settlement with the claimant. Final claim settlements may vary significantly from the present estimates, particularly since many claims will not be settled until well into the future. For a discussion of The Hartford’s judgment in estimating reserves for Property & Casualty see Part II, Item 7, MD&A - Critical Accounting Estimates, Property & Casualty Insurance Product Reserves, Net of Reinsurance, and for historical payments by reserve line net of reinsurance, see Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Consolidated Financial Statements. The timing of future payments for the next twelve months and for beyond twelve months could vary materially from historical payment patterns due to, among other things, changes in claim reporting and payment patterns and large unanticipated settlements. In particular, there is significant uncertainty over the claim payment patterns of asbestos and environmental claims.

Employee Benefits reserves as of December 31, 2025 were $8.8 billion and net of reinsurance were $8.5 billion. Group life and disability obligations are estimated using assumptions based on the Company’s historical experience, modified for recent observed trends. For a discussion of The Hartford’s

109

[[GREPCENT_TABLE]]
[["Table of Contents","","Index to MD&A"]]
[[/GREPCENT_TABLE]]

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

judgment in estimating LTD reserves for Employee Benefits see Part II, Item 7, MD&A - Critical Accounting Estimates, Employee Benefit LTD Reserves, Net of Reinsurance. For additional information about future policy benefits and other policyholder funds and benefits payable, see Note 11 - Reserve for Future Policy Benefits and Note 12 - Other Policyholder Funds and Benefits Payable of Notes to Consolidated Financial Statements. For historical payments by reserve line, net of reinsurance, see Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Consolidated Financial Statements. Due to the significance of the assumptions used, payments for the next twelve months and beyond twelve months could materially differ from historical patterns.

Corporate reserves as of December 31, 2025 were $356, and net of reinsurance were $143. These reserves related to retained run-off liabilities of its former life and annuity business. For additional information about future policy benefits and other policyholder funds and benefits payable, see Note 11 - Reserve for Future Policy Benefits and Note 12 - Other Policyholder Funds and Benefits Payable of Notes to Consolidated Financial Statements.

Hartford Funds

Hartford Funds' principal sources of operating funds are fees earned from basis points on assets under management with uses primarily for payments to subadvisors and other general operating expenses. As of December 31, 2025, Hartford Funds cash and short-term investments were $396.

Purchase and Other Obligations

The Hartford’s unfunded commitments to purchase investments in limited partnerships and other alternative investments, mortgage loans, private debt and equity securities, as well as tax credits are disclosed in Note 14 - Commitments and Contingencies of Notes to Consolidated Financial Statements. It is anticipated that these unfunded commitments will be funded through the Company’s normal operating and investing activities.

In the normal course of business, the Company enters into contractual commitments to purchase various goods and services such as maintenance, human resources, and information technology. The Company’s operating lease commitments are disclosed in Note 20 - Leases of Notes to Consolidated Financial Statements. It is anticipated that these purchase commitments and operating lease obligations will be funded through the Company’s normal operating and investing activities.

Capitalization

[[GREPCENT_TABLE]]
[["Capital Structure"],["","December 31, 2025","December 31, 2024","Change"],["Long-term debt","$","4,371","","$","4,366","","\u2014%"],["Total debt","4,371","","4,366","","\u2014%"],["Common stockholders' equity, excluding AOCI, net of tax","20,702","","18,999","","9%"],["Preferred stock","334","","334","","\u2014%"],["AOCI, net of tax","(2,057)","","(2,886)","","29%"],["Total stockholders\u2019 equity","$","18,979","","$","16,447","","15%"],["Total capitalization","$","23,350","","$","20,813","","12%"],["Debt to stockholders\u2019 equity","23","%","27","%"],["Debt to capitalization","19","%","21","%"]]
[[/GREPCENT_TABLE]]

Total capitalization increased $2,537, or 12%, as of December 31, 2025 compared to December 31, 2024 primarily due to net income in excess of common stockholder dividends in the period, and a decrease in net unrealized losses on fixed maturities, AFS partially offset by share repurchases.

For additional information on AOCI, net of tax, including unrealized gains (losses) from securities, see Note 17 - Changes in and Reclassifications From Accumulated Other Comprehensive Income (Loss) and Note 5 - Investments of Notes to Consolidated Financial Statements. For additional information on debt, see Note 13 - Debt of Notes to Consolidated Financial Statements.

110

[[GREPCENT_TABLE]]
[["Table of Contents","","Index to MD&A"]]
[[/GREPCENT_TABLE]]

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

Cash Flow

[[GREPCENT_TABLE]]
[["","2025","2024","2023"],["Net cash provided by operating activities","$","5,922","","$","5,909","","$","4,220"],["Net cash used for investing activities","$","(3,758)","","$","(3,768)","","$","(2,431)"],["Net cash used for financing activities","$","(2,235)","","$","(2,076)","","$","(1,947)"],["Cash and restricted cash\u2014 end of year","$","177","","$","234","","$","189"]]
[[/GREPCENT_TABLE]]

Year ended December 31, 2025 compared to 2024

Net cash provided by operating activities increased slightly in 2025 as compared to the prior year primarily driven by an increase in P&C and Employee Benefits premiums received partially offset by an increase in loss and loss adjustment expenses paid and higher operating expenses, including increased commissions and staffing costs.

Cash used for investing activities decreased slightly in 2025 due to more cash used in financing activities partially offset by more cash generated from operating activities.

Cash used for financing activities increased in 2025 as compared to the prior year primarily driven by an increase in treasury stock acquired through share repurchases, a change from net issuance to net return of shares under incentive and stock compensation plans, and an increase in dividends paid on common stock.

Operating cash flows for the year ended December 31, 2025 have been adequate to meet liquidity requirements.

Equity Markets

For a discussion of the potential impact of the equity markets on capital and liquidity, see the Financial Risk on U.S. Statutory Capital and Liquidity Risk section in this MD&A.

Ratings

Ratings are an important factor in establishing a competitive position in the insurance marketplace and impact the Company's ability to access financing and its cost of borrowing. There can be no assurance that the Company’s ratings will continue for any given period of time, or that they will not be changed. In the event the Company’s ratings are downgraded, the Company’s competitive position, ability to access financing, and its cost of borrowing, may be adversely impacted.

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

Among other factors, rating agencies consider the level of statutory capital and surplus of our U.S. insurance subsidiaries as well as the level of U.S. GAAP capital held by the Company in determining the Company's financial strength and credit ratings. Rating agencies may implement changes to their capital formulas that have the effect of increasing the amount of capital we must hold in order to maintain our current ratings. See Part I, Item 1A. Risk Factors — “Downgrades in our financial strength or credit ratings may make our products less attractive, increase our cost of capital and inhibit our ability to refinance our debt.”

On July 3, 2025, A.M. Best upgraded the senior debt rating of the Company to "a" from "a-". The upgrade of the debt rating was based on the Company's balance sheet strength, operating performance, favorable business profile and enterprise risk management. A.M. Best also affirmed the insurance financial strength ratings for the Company. A.M. Best’s outlook for all ratings is “stable”.

On August 19, 2025, Standard & Poor's ("S&P") raised the long-term issuer credit and financial strength ratings on The Hartford's core subsidiaries to "AA-" from "A+" and the issuer credit rating on the Company to "A-" from "BBB+". At the same time, S&P upgraded all debt ratings of the Company, including raising the senior debt rating to "A-" from "BBB+". These upgrades reflect improved underwriting performance, strong profitability, and risk management that have increased the Company's capital resiliency. S&P's outlook for all ratings is "stable".

On October 10, 2025, Moody's upgraded the senior unsecured debt rating of the Company to "A3" from "Baa1", upgraded the insurance financial strength ratings (IFS) of The Hartford's primary P&C insurance subsidiaries to "Aa3" from "A1", and affirmed the IFS rating of HLA at "A1". The ratings upgrade reflects the Company's track record of strong, stable profitability and strong risk adjusted capitalization supported by well diversified revenues and earnings from its P&C insurance, Employee Benefits and Hartford Funds businesses. Moody's outlook for all ratings is "stable".

111

[[GREPCENT_TABLE]]
[["Table of Contents","","Index to MD&A"]]
[[/GREPCENT_TABLE]]

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

Insurance Financial Strength Ratings as of February 19, 2026

[[GREPCENT_TABLE]]
[["","A.M. Best","Standard & Poor's","Moody's"],["Hartford Fire Insurance Company","A+","AA-","Aa3"],["Hartford Life and Accident Insurance Company","A+","AA-","A1"],["Navigators Insurance Company","A+","AA-","Not Rated"],["Other Ratings:"],["The Hartford Insurance Group, Inc.:"],["Senior debt","a","A-","A3"]]
[[/GREPCENT_TABLE]]

Statutory Capital

[[GREPCENT_TABLE]]
[["U.S. Statutory Capital Rollforward for the Company's Insurance Subsidiaries"],["","Property and Casualty Insurance Subsidiaries [1] [2]","Employee Benefits Insurance Subsidiary","Total"],["U.S. statutory capital at January 1, 2025","$","13,294","","$","2,708","","$","16,002"],["Statutory income","2,870","","566","","3,436"],["Dividends to parent","(1,742)","","(592)","","(2,334)"],["Other items","15","","(8)","","7"],["Net change to U.S. statutory capital","1,143","","(34)","","1,109"],["U.S. statutory capital at December 31, 2025","$","14,437","","$","2,674","","$","17,111"]]
[[/GREPCENT_TABLE]]

[1]The statutory capital for property and casualty insurance subsidiaries in this table does not include the value of an intercompany note owed by HHI to Hartford Fire Insurance Company.

[2]Excludes insurance operations in the U.K.

U.S. STAT to U.S. GAAP Differences

Significant differences between U.S. GAAP stockholders’ equity and aggregate statutory capital prepared in accordance with U.S. STAT include the following:

•U.S. STAT excludes equity of non-insurance and foreign insurance subsidiaries not held by U.S. insurance subsidiaries.

•Costs incurred by the Company to acquire insurance policies are deferred under U.S. GAAP while those costs are expensed immediately under U.S. STAT.

•Temporary differences between the book and tax basis of an asset or liability which are recorded as deferred tax assets are evaluated for recoverability under U.S. GAAP while these amounts are then subject to further admissibility tests under U.S. STAT.

•The assumptions used in the determination of Employee Benefits reserves (i.e., for Employee Benefits contracts) are prescribed under U.S. STAT, while the assumptions used under U.S. GAAP are generally the Company’s best estimates.

•The difference between the amortized cost and fair value of fixed maturity and other investments, net of tax, is recorded as an increase or decrease to the carrying value of the related asset and to equity under U.S. GAAP, while, under

U.S. STAT, most investments are carried at amortized cost with only certain securities carried at fair value, such as equity securities and certain lower rated bonds required by the NAIC to be recorded at the lower of amortized cost or fair value.

•U.S. STAT for life insurance companies like HLA establishes a formula reserve for realized and unrealized losses due to default and equity risks associated with certain invested assets (the Asset Valuation Reserve), while U.S. GAAP does not. Also, for those realized gains and losses caused by changes in interest rates, U.S. STAT for life insurance companies defers and amortizes the gains and losses into income over the original life to maturity of the asset sold (the Interest Maintenance Reserve) while U.S. GAAP does not.

•Goodwill arising from the acquisition of a business is tested for recoverability on an annual basis (or more frequently, as necessary) for U.S. GAAP, while under U.S. STAT goodwill is amortized over a period not to exceed 10 years and the amount of goodwill admitted as an asset is limited.

•The deferred gain on retroactive reinsurance for losses ceded to the A&E ADC agreement is recognized within a special category of surplus under U.S. STAT but is recognized within other liabilities under U.S. GAAP. In addition, the pattern of amortizing the deferred gain for U.S. GAAP and releasing special surplus for STAT is different.

112

[[GREPCENT_TABLE]]
[["Table of Contents","","Index to MD&A"]]
[[/GREPCENT_TABLE]]

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

For U.S. GAAP the deferred gain is amortized in proportion of actual recoveries collected to total expected recoveries, while for STAT special surplus is released dollar for dollar once recoveries collected exceed the reinsurance premium.

In addition, certain assets, including a portion of premiums receivable and fixed assets, are non-admitted (recorded at zero value and charged against surplus) under U.S. STAT. U.S. GAAP generally evaluates assets based on their recoverability.

Risk Based Capital

The Company's U.S. insurance companies' states of domicile impose RBC requirements. The requirements provide a means of measuring the minimum amount of statutory capital appropriate for an insurance company to support its overall business operations based on its size and risk profile. Companies below specific trigger points or ratios are classified within certain levels, each of which requires specified corrective action. All of the Company's U.S. operating insurance subsidiaries had RBC ratios in excess of the minimum levels required by the applicable insurance regulations.

Similar to the RBC ratios that are employed by U.S. insurance regulators, regulatory authorities in the international jurisdictions in which the Company operates generally establish minimum solvency requirements for insurance companies. All of the Company's international insurance subsidiaries expect to maintain capital levels in excess of the minimum levels required by the applicable regulatory authorities.

Sensitivity

In any particular period, statutory capital amounts and RBC ratios may increase or decrease depending upon a variety of factors. The amount of change in the statutory capital or RBC ratios can vary based on individual factors and may be compounded in extreme scenarios or if multiple factors occur at the same time. At times the impact of changes in certain market factors or a combination of multiple factors on RBC ratios can be counterintuitive. For further discussion on these factors, see MD&A - Enterprise Risk Management, Financial Risk on Statutory Capital.

Statutory capital at the insurance subsidiaries has been maintained at capital levels commensurate with the Company's desired RBC ratios and ratings from rating agencies. The amount of statutory capital can increase or decrease depending on a number of factors affecting insurance results including, among other factors, the level of catastrophe claims incurred, the amount of reserve development, the effect of changes in interest rates on investment income and the discounting of loss reserves, and the effect of realized gains and losses on investments.

Contingencies

Legal Proceedings

For a discussion regarding The Hartford’s legal proceedings, see the information contained in Note 14 - Commitments and Contingencies of the Notes to Consolidated Financial Statements and Part I, Item 3 — Legal Proceedings, which are incorporated herein by reference.

Legislative and Regulatory Developments

Congress may consider a variety of proposals including a possible increase in the corporate tax rate to offset the cost of any new spending. Tax proposals and regulatory initiatives that may be considered by Congress and/or the U.S. Treasury Department could have a material effect on the Company and its insurance businesses. The nature and timing of any such Congressional or regulatory action with respect to any such efforts is unclear.

Guaranty Fund and Other Insurance-related Assessments

For a discussion regarding Guaranty Funds and Other Insurance-related Assessments, see Note 14 - Commitments and Contingencies of Notes to Consolidated Financial Statements.

Impact of New Accounting Standards

For a discussion of accounting standards, see Note 1 - Basis of Presentation and Significant Accounting Policies of Notes to Consolidated Financial Statements.

113

[[GREPCENT_TABLE]]
[["Table of Contents","","Index to MD&A"]]
[[/GREPCENT_TABLE]]

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

Acronyms

[[GREPCENT_TABLE]]
[["A&E","Asbestos and Environmental","HIG","The Hartford Insurance Group, Inc."],["ABS","Asset-Backed Securities","HIMCO","Hartford Investment Management Company"],["ACL","Allowance for Credit Losses","HLA","Hartford Life and Accident Insurance Company"],["ADC","Adverse Development Cover","IBNR","Incurred But Not Reported"],["AFS","Available-For-Sale","IT","Information Technology"],["ALAE","Allocated Loss Adjustment Expenses","LAE","Loss Adjustment Expense"],["AOCI","Accumulated Other Comprehensive Income (Loss)","LCL","Liability for Credit Losses"],["AUM","Assets Under Management","LTD","Long-Term Disability"],["BSA","Boy Scouts of America","LTV","Loan-to-Value"],["CAY","Current Accident Year","MD&A","Management's Discussion and Analysis of Financial Conditions and Results of Operations"],["CLOs","Collateralized Loan Obligations","NAIC","National Association of Insurance Commissioners"],["CMBS","Commercial Mortgage-Backed Securities","NIC","Navigators Insurance Company"],["CODM","Chief Operating Decision Maker","NICO","National Indemnity Company, a subsidiary of Berkshire Hathaway Inc. (\u201cBerkshire\u201d)"],["CPRI","Credit and Political Risk Insurance","NM","Not Meaningful"],["DAC","Deferred Policy Acquisition Costs","NSIC","Navigators Specialty Insurance Company"],["DLR","Disabled Life Reserve","OCI","Other Comprehensive Income"],["D&O","Directors and Officers","OTC","Over-the-Counter"],["DSCR","Debt Service Coverage Ratio","P&C","Property and Casualty"],["ELR","Expected Loss Ratio","PV&T","Political Violence and Terrorism"],["ERCC","Enterprise Risk and Capital Committee","PYD","Prior Accident Year Development"],["ESPP","The Hartford Employee Stock Purchase Plan","RBC","Risk-Based Capital"],["ETF","Exchange-Traded Funds","RMBS","Residential Mortgage-Backed Securities"],["FAL","Funds at Lloyd's","ROA","Return on Assets"],["FASB","Financial Accounting Standards Board","ROE","Return on Equity"],["FHCF","Florida Hurricane Catastrophe Fund","SEC","Securities and Exchange Commission"],["FHLBB","Federal Home Loan Bank of Boston","SCR","Solvency Capital Requirement"],["FVO","Fair Value Option","SOFR","Secured Overnight Financing Rate"],["GAAP","Generally Accepted Accounting Principles","TRIPRA","Terrorism Risk Insurance Program Reauthorization Act"],["HHI","Hartford Holdings, Inc.","ULAE","Unallocated Loss Adjustment Expenses"]]
[[/GREPCENT_TABLE]]

114

Table of Contents