Part II - Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations Reconciliation of Net Income (Loss) to Core Earnings
## Table 0 ##
[1]Includes income tax benefit on items not included in core earnings and other federal income tax benefits and charges, including an $877 charge in 2017 primarily due to a reduction in net deferred tax assets as a result of the decrease in the Federal income tax rate from 35% to 21%.
Core Earnings Margin- a non-GAAP financial measure that the Company uses to evaluate, and believes is an important measure of, the Group Benefits segment’s operating performance.
Core earnings margin is calculated by dividing (a) core earnings by (b) revenues excluding buyouts and realized gains (losses).
Net income margin 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) on revenues or obscured by the effect on net income of realized capital gains (losses), integration costs, and the impact of Tax Reform on net deferred tax assets.
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 net income margin and core earnings 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.
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.
Deferred policy acquisition costs 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 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 positive net flows or favorable market performance will have a favorable impact on fee income.
Conversely, either negative net flows or unfavorable market performance will reduce fee income.
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 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 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 ratemaking 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.
INVESTMENT RESULTS Composition of Invested Assets
## Table 1 ##
[1]Effective January 1, 2018, with the adoption of new accounting standards for financial instruments, equity securities, AFS were reclassified to equity securities at fair value.
[2]Primarily consists of investments of consolidated investment funds and derivative instruments which are carried at fair value.
Year ended December 31, 2018 compared to the year ended December 31, 2017 Total investments increased primarily due to an increase in short-term investments and mortgage loans, largely offset by a decrease in fixed maturities, AFS.
Fixed maturities, AFS decreased primarily due to a decrease in valuations due to widening of spreads and higher interest rates.
Short-term investments increased due to proceeds from the sale of the life and annuity business sold in May 2018 and holding additional short-term investments in preparation to fund the Navigators acquisition and debt that matured in January 2019.
Mortgage Loans increased largely due to new originations of commercial mortgage loans within the industrial, multifamily and single family markets.
## Table 2 ##
[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 income from derivatives that qualify for hedge accounting and hedge fixed maturities.
Year ended December 31, 2018 compared to the year ended December 31, 2017 Total net investment income increased primarily due to higher income from fixed maturities as a result of higher average asset levels during 2018 as compared to 2017 largely driven by the acquisition of Aetna's U. S.  group life and disability business in November 2017.
In addition, total net investment income increased due to higher returns on private equity and real estate limited partnership investments as well as a higher reinvestment rate on fixed maturities.
Annualized net investment income yield, excluding non-routine items which include prepayment penalties on mortgage loans and make-whole payments on fixed maturities, was 3.7% in 2018 up from 3.6% for the same period for 2017.
Part II - Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations Equity Sensitivity [1]
## Table 3 ##
[1]Table excludes the Company's investment in Hopmeadow Holdings LP which is reported in other assets on the Company's Consolidated Balance Sheets.
Hartford Funds assets under management Hartford Funds earnings are significantly influenced by the U. S.  and other equity markets.
If equity markets were to hypothetically decline 20% and remain depressed for one year, the estimated before tax impact on reported earnings for that one year period is $(37) as of December 31, 2018.
The selection of the 20% shock to the S&P 500 was made only as an illustration to the potential hypothetical impact of such an event and should not be construed as a prediction of future market events.
Actual results could differ materially due to the nature of the estimates and assumptions used in the analysis.
Foreign Currency Exchange Risk Foreign currency exchange risk is the risk of financial loss due to changes in the relative value between currencies.
Sources of Currency Risk The Company has foreign currency exchange risk in non-U.
S.  dollar denominated investments, which primarily consist of fixed maturity and equity investments and foreign denominated cash.
Impact Changes in relative values between currencies can create variability in cash flows and realized or unrealized gains and losses on changes in the fair value of assets and liabilities.
Based on the fair values of the Company’s non-U.
S.  dollar denominated securities and derivative instruments as of December?31, 2018 and 2017, management estimates that a hypothetical 10% unfavorable change in exchange rates would decrease the fair values by a before tax total of $9 and $10, respectively.
Actual results could differ materially due to the nature of the estimates and assumptions used in the analysis.
Management The open foreign currency exposure of nonU.
S.  dollar denominated investments will most commonly be reduced through the sale of the assets or through hedges using currency futures/forwards/swaps.
In order to manage the currency risk related to any non-U.
S.  dollar denominated liability contracts, the Company holds non-U.
S.  dollar denominated investments which match the underlying currency exposure of the liabilities.
Assets and Liabilities Subject to Foreign Currency Exchange Risk Non-U.
S.  dollar denominated fixed maturities, equities, and cash The fair values of the non-U.
S.  dollar denominated fixed maturities, equities and cash, excluding assets held for sale, at December?31, 2018 and 2017 were approximately $178 and $298, respectively.
Included in these amounts are $119 and $128 at December?31, 2018 and 2017, respectively, related to nonU.
S.  dollar denominated fixed maturities, equities and cash that directly support liabilities denominated in the same currencies.
The currency risk of the remaining non-U.
S.  dollar denominated fixed maturities and equities are hedged with foreign currency swaps.
Investment in a P&C run-off entity in the United Kingdom During 2015, the Company entered into certain foreign currency forwards to hedge the currency impacts on changes in equity of a P&C run-off entity in the United Kingdom that was sold during 2017.
At December?31, 2016, the derivatives used to hedge the currency impacts had a total notional amount of $200, and a total fair value of $(2), respectively.
The Company terminated these hedges in 2017.
Financial Risk on Statutory Capital Statutory surplus amounts and risk-based capital (“RBC”) ratios may increase or decrease in any period depending upon a variety of factors and may be compounded in extreme scenarios or if multiple factors occur at the same time.
In general, as equity market levels and interest rates decline, the amount and volatility of either our actual or potential obligation, as well as the related statutory surplus and capital margin can be materially negatively affected, sometimes at a greater than linear rate.
At times the impact of changes in certain market factors or a combination of multiple factors on RBC ratios can be counterintuitive.
Factors include: · A decrease in the value of certain fixed-income and equity securities in our investment portfolio, due in part to credit spreads widening, may result in a decrease in statutory surplus and RBC ratios.
· Decreases in the value of certain derivative instruments that do not get hedge accounting, may reduce statutory surplus and RBC ratios.
· Non-market factors can also impact the amount and volatility of either our actual or potential obligation, as well as the related statutory surplus and capital margin.
Most of these factors are outside of the Company’s control.
The Company’s financial strength and credit ratings are significantly influenced by the statutory surplus amounts and RBC ratios of our insurance company subsidiaries.
In addition, rating agencies may implement changes to their internal models that have the
THE HARTFORD FINANCIAL SERVICES GROUP, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) but anticipates using the majority of the program in 2020.
Any repurchase of shares under the equity repurchase program is dependent on market conditions and other factors.
Preferred Stock On November 6, 2018, the Company issued 13.8 million depositary shares each representing 1/1000th interest in a share of the Company’s 6.0% Series G non-cumulative perpetual preferred stock (the “Preferred Stock”) with a liquidation preference of $25,000 per share (equivalent to $25.00 per depositary share), for net cash proceeds of $334.
The Preferred Stock is perpetual and has no maturity date.
Dividends will be payable, if declared, quarterly in arrears on the 15th day of February, May, August and November of each year, commencing on February 15, 2019.
If a dividend is not declared before the dividend payment date for any dividend period, The Hartford will have no obligation to pay dividends otherwise attributable to such dividend period.
If a dividend is not declared and paid or made payable on all outstanding shares of the Preferred Stock for the latest completed dividend period, no dividends may be paid or declared on The Hartford’s common stock and The Hartford may not purchase, redeem, or otherwise acquire its common stock.
The Preferred Stock is redeemable at the Company’s option in whole or in part, on or after November?15, 2023 at a redemption price of $25,000 per share, plus unpaid dividends attributable to the current dividend period.
Prior to November 15, 2023, the Preferred Stock is redeemable at the Company’s option, in whole but not in part, within 90 days of the occurrence of (a) a rating agency event at a redemption price equal to $25,500 per share, plus unpaid dividends attributable to the current dividend period in circumstances where a rating agency changes its criteria used to assign equity credit to securities like the Preferred Stock; or (b) a regulatory capital event at a redemption price equal to $25,000 per share, plus unpaid dividends attributable to the current dividend period in circumstances where a capital regulator such as a state insurance regulator changes or proposes to change capital adequacy rules.
On December 13, 2018, The Hartford’s board of directors declared a dividend of $412.50 on each share of the Series G preferred stock (equivalent to $0.4125 per depository share) payable on February?15, 2019, to stockholders of record at the close of business on February 1, 2019.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) F-72 Statutory Results The domestic insurance subsidiaries of The Hartford prepare their statutory financial statements in conformity with statutory accounting practices prescribed or permitted by the applicable state insurance department which vary materially from U. S.  GAAP.
Prescribed statutory accounting practices include publications of the National Association of Insurance Commissioners (“NAIC”), as well as state laws, regulations and general administrative rules.
The differences between statutory financial statements and financial statements prepared in accordance with U. S.  GAAP vary between domestic and foreign jurisdictions.
The principal differences are that statutory financial statements do not reflect deferred policy acquisition costs and limit deferred income taxes, predominately use interest rate and mortality assumptions prescribed by the NAIC for life benefit reserves, generally carry bonds at amortized cost, and present reinsurance assets and liabilities net of reinsurance.
For reporting purposes, statutory capital and surplus is referred to collectively
## Table 4 ##
as "statutory capital".
Life insurance subsidiaries include the Group Benefits insurance subsidiary and, for periods up until the sale date, the life and annuity business sold in May 2018.
Statutory Net Income (Loss)
## Table 5 ##
Regulatory Capital Requirements The Company's U. S.  insurance companies' states of domicile impose risk-based capital (“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 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 have capital levels in excess of the minimum levels required by the applicable regulatory authorities.
Dividend Restrictions Dividends to the HFSG Holding Company from its insurance subsidiaries are restricted by insurance regulation.
The payment of dividends by Connecticut-domiciled insurers is limited under the insurance holding company laws of Connecticut.
These laws require notice to and approval by the state insurance commissioner for the declaration or payment of any dividend, which, together with other dividends or distributions made within the preceding twelve months, exceeds the greater of (i) 10% of the insurer’s policyholder surplus as of December 31 of the preceding year or (ii) net income (or net gain from operations, if such company is a life insurance company) for the twelve-month
Arconic and its subsidiaries file income tax returns in the U. S.  federal jurisdiction and various states and foreign jurisdictions.
With a few minor exceptions, Arconic is no longer subject to income tax examinations by tax authorities for years prior to 2006.
All U. S.  tax years prior to 2016 have been audited by the Internal Revenue Service.
Various state and foreign jurisdiction tax authorities are in the process of examining Arconic’s income tax returns for various tax years through 2015.
A reconciliation of the beginning and ending amount of unrecognized tax benefits (excluding interest and penalties) was as follows:
## Table 6 ##
For all periods presented, a portion of the balance at end of year pertains to state tax liabilities, which are presented before any offset for federal tax benefits.
The effect of unrecognized tax benefits, if recorded, that would impact the annual effective tax rate for 2016, 2015, and 2014 would be approximately 6%, 7%, and 4%, respectively, of pretax book income.
Arconic does not anticipate that changes in its unrecognized tax benefits will have a material impact on the Statement of Consolidated Operations during 2017 (see Tax in Note L for a matter for which no reserve has been recognized).
It is Arconic’s policy to recognize interest and penalties related to income taxes as a component of the Provision for income taxes on the accompanying Statement of Consolidated Operations.
In 2016, 2015, and 2014, Arconic did not recognize any interest or penalties.
Due to the expiration of the statute of limitations, settlements with tax authorities, and refunded overpayments, Arconic recognized interest income of $1 in 2015 but did not recognize any interest income in 2016 or 2014.
As of December 31, 2016 and 2015, the amount accrued for the payment of interest and penalties was $2 and $1, respectively.
S.  Receivables Sale of Receivables Programs Arconic has an arrangement with three financial institutions to sell certain customer receivables without recourse on a revolving basis.
The sale of such receivables is completed through the use of a bankruptcy remote special purpose entity, which is a consolidated subsidiary of Arconic.
This arrangement provides for minimum funding of $200 up to a maximum of $400 for receivables sold.
On March 30, 2012, Arconic initially sold $304 of customer receivables in exchange for $50 in cash and $254 of deferred purchase price under this arrangement.
Arconic has received additional net cash funding of $300 for receivables sold ($1,758 in draws and $1,458 in repayments) since the program’s inception, including $100 ($500 in draws and $400 in repayments) in 2016.
No draws or repayments occurred in 2015.
As of December 31, 2016 and 2015, the deferred purchase price receivable was $83 and $249, respectively, which was included in Other receivables on the accompanying Consolidated Balance Sheet.
The deferred purchase price receivable is reduced as collections of the underlying receivables occur; however, as this is a revolving program, the sale of new receivables will result in an increase in the deferred purchase price receivable.
The net change in the deferred purchase price receivable was reflected in the (Increase) decrease in receivables line item on the accompanying Statement of Consolidated Cash Flows.
This activity is reflected as an operating cash flow because the related customer receivables are the result of an operating activity with an insignificant, short-term interest rate risk.

<table><tr><td></td><td colspan="3">For the years ended December 31,</td></tr><tr><td></td><td>2018</td><td>2017</td><td>2016</td></tr><tr><td>Net income (loss)</td><td>$1,807</td><td>$-3,131</td><td>$896</td></tr><tr><td>Preferred stock dividends</td><td>6</td><td>—</td><td>—</td></tr><tr><td>Net income (loss) available to common stockholders</td><td>1,801</td><td>$-3,131</td><td>$896</td></tr><tr><td>Less: Net realized capital gains (losses) excluded from core earnings, before tax</td><td>-118</td><td>160</td><td>-112</td></tr><tr><td>Less: Loss on extinguishment of debt, before tax</td><td>-6</td><td>—</td><td>—</td></tr><tr><td>Less: Loss on reinsurance transactions, before tax</td><td>—</td><td>—</td><td>-650</td></tr><tr><td>Less: Pension settlement, before tax</td><td>—</td><td>-750</td><td>—</td></tr><tr><td>Less: Integration and transaction costs associated with acquired business, before tax</td><td>-47</td><td>-17</td><td>—</td></tr><tr><td>Less: Income tax benefit (expense) [1]</td><td>75</td><td>-669</td><td>463</td></tr><tr><td>Less: Income (loss) from discontinued operations, net of tax</td><td>322</td><td>-2,869</td><td>283</td></tr><tr><td>Core earnings</td><td>$1,575</td><td>$1,014</td><td>$912</td></tr></table>
<table><tr><td></td><td colspan="2">December 31, 2018</td><td colspan="2">December 31, 2017</td></tr><tr><td></td><td>Amount</td><td>Percent</td><td>Amount</td><td>Percent</td></tr><tr><td>Fixed maturities, available-for-sale ("AFS"), at fair value</td><td>$35,652</td><td>76.2%</td><td>$36,964</td><td>81.9%</td></tr><tr><td>Fixed maturities, at fair value using the fair value option ("FVO")</td><td>22</td><td>—%</td><td>41</td><td>0.1%</td></tr><tr><td>Equity securities, at fair value [1]</td><td>1,214</td><td>2.6%</td><td></td><td></td></tr><tr><td>Equity securities, AFS, at fair value [1]</td><td></td><td></td><td>1,012</td><td>2.3%</td></tr><tr><td>Mortgage loans</td><td>3,704</td><td>7.9%</td><td>3,175</td><td>7.0%</td></tr><tr><td>Limited partnerships and other alternative investments</td><td>1,723</td><td>3.7%</td><td>1,588</td><td>3.5%</td></tr><tr><td>Other investments [2]</td><td>192</td><td>0.4%</td><td>96</td><td>0.2%</td></tr><tr><td>Short-term investments</td><td>4,283</td><td>9.2%</td><td>2,270</td><td>5.0%</td></tr><tr><td>Total investments</td><td>$46,790</td><td>100.0%</td><td>$45,146</td><td>100.0%</td></tr></table>
<table><tr><td></td><td colspan="6">For the years ended December 31,</td></tr><tr><td></td><td colspan="2">2018</td><td colspan="2">2017</td><td colspan="2">2016</td></tr><tr><td>(Before tax)</td><td>Amount</td><td>Yield [1]</td><td>Amount</td><td>Yield [1]</td><td>Amount</td><td>Yield [1]</td></tr><tr><td>Fixed maturities [2]</td><td>$1,459</td><td>3.9%</td><td>$1,303</td><td>3.9%</td><td>$1,319</td><td>4.0%</td></tr><tr><td>Equity securities</td><td>32</td><td>3.1%</td><td>24</td><td>2.8%</td><td>22</td><td>3.2%</td></tr><tr><td>Mortgage loans</td><td>141</td><td>4.1%</td><td>124</td><td>4.1%</td><td>116</td><td>4.2%</td></tr><tr><td>Limited partnerships and other alternative investments</td><td>205</td><td>13.2%</td><td>174</td><td>12.0%</td><td>128</td><td>8.6%</td></tr><tr><td>Other [3]</td><td>20</td><td></td><td>49</td><td></td><td>51</td><td></td></tr><tr><td>Investment expense</td><td>-77</td><td></td><td>-71</td><td></td><td>-59</td><td></td></tr><tr><td>Total net investment income</td><td>$1,780</td><td>4.0%</td><td>$1,603</td><td>4.0%</td><td>$1,577</td><td>4.0%</td></tr><tr><td>Total net investment income excluding limited partnerships and other alternative investments</td><td>$1,575</td><td>3.7%</td><td>$1,429</td><td>3.7%</td><td>$1,449</td><td>3.8%</td></tr></table>
<table><tr><td></td><td colspan="3">As of December 31, 2018</td><td colspan="3">As of December 31, 2017</td></tr><tr><td></td><td></td><td colspan="2">Shock to S&P 500</td><td></td><td colspan="2">Shock to S&P 500</td></tr><tr><td>(Before tax)</td><td>Fair Value</td><td>+20%</td><td>-20%</td><td>Fair Value</td><td>+20%</td><td>-20%</td></tr><tr><td>Investment Portfolio</td><td>$3,045</td><td>$419</td><td>$-418</td><td>$2,676</td><td>$360</td><td>$-360</td></tr><tr><td>Assets supporting pension and other post-retirement benefit plans</td><td>$1,226</td><td>$209</td><td>$-209</td><td>$1,459</td><td>$251</td><td>$-251</td></tr></table>
<table><tr><td></td><td colspan="3">For the years ended December 31,</td></tr><tr><td></td><td>2018</td><td>2017</td><td>2016</td></tr><tr><td>Group Benefits Insurance Subsidiary</td><td>$390</td><td>$- 1,066</td><td>$208</td></tr><tr><td>Property and Casualty Insurance Subsidiaries</td><td>1,114</td><td>950</td><td>304</td></tr><tr><td>Life and annuity business sold in May, 2018</td><td>196</td><td>369</td><td>349</td></tr><tr><td>Total</td><td>$1,700</td><td>$253</td><td>$861</td></tr></table>
<table><tr><td></td><td colspan="2">As of December 31,</td></tr><tr><td></td><td>2018</td><td>2017</td></tr><tr><td>Group Benefits Insurance Subsidiary</td><td>$2,407</td><td>$2,029</td></tr><tr><td>Property and Casualty Insurance Subsidiaries</td><td>7,435</td><td>7,396</td></tr><tr><td>Total</td><td>$9,842</td><td>$9,425</td></tr></table>
<table><tr><td>December 31,</td><td>2016</td><td>2015</td><td>2014</td></tr><tr><td>Balance at beginning of year</td><td>$18</td><td>$7</td><td>$8</td></tr><tr><td>Additions for tax positions of the current year</td><td>12</td><td>-</td><td>-</td></tr><tr><td>Additions for tax positions of prior years</td><td>-</td><td>14</td><td>4</td></tr><tr><td>Reductions for tax positions of prior years</td><td>-</td><td>-2</td><td>-3</td></tr><tr><td>Settlements with tax authorities</td><td>-1</td><td>-</td><td>-1</td></tr><tr><td>Expiration of the statute of limitations</td><td>-1</td><td>-1</td><td>-</td></tr><tr><td>Foreign currency translation</td><td>-</td><td>-</td><td>-1</td></tr><tr><td>Balance at end of year</td><td>$28</td><td>$18</td><td>$7</td></tr></table>

Question: Which element makes up more than 5% of the total in 2017?
Answer: Fixed maturities, available-for-sale ("AFS"), at fair value, Mortgage loans, Short-term investments