Company: HIG-PG
Filing Date: 2025-02-21
Form Type: 10-K
Source: 0000874766-25-000023
Chunk: 416

Company: HARTFORD INSURANCE GROUP, INC.
Filing Date: 2025-02-21
Form: 10-K
Item: Item 1
Chunk 416
---
 default swaps that assume credit risk as part of replication transactions. Replication transactions are used as an economical means to synthetically replicate the characteristics and performance of assets that are permissible investments under the Company’s investment policies. As of December 31, 2024 and 2023, the Company did not hold credit default swaps that assume credit risk.For further information on credit derivatives, see Note 6 - Derivatives of Notes to Consolidated Financial Statements.Credit Risk of Business OperationsA portion of the Company's Business Insurance business is written with large deductibles or under retrospectively-rated plans. Under some commercial insurance contracts with a large deductible, the Company is obligated to pay the claimant the full amount of the claim and the Company is subsequently reimbursed by the policyholder for the deductible amount. As such, the Company is subject to credit risk until reimbursement is made. Retrospectively-rated policies are utilized primarily for workers' compensation coverage, whereby the ultimate premium is adjusted based on actual losses incurred. Although the premium adjustment feature of a retrospectively-rated policy substantially reduces insurance risk for the Company, it presents credit risk to the Company. The Company’s results of operations could be adversely affected if a significant portion of such policyholders failed to reimburse the Company for the deductible amount or the amount of additional premium owed under retrospectively-rated policies. The Company manages these credit risks through credit analysis, collateral requirements, and oversight. For more information, see Note 7- Premiums Receivable and Agents' Balances of Notes to Consolidated Financial Statements. Interest Rate RiskInterest rate risk is the risk of financial loss due to adverse changes in the value of assets and liabilities arising from movements in interest rates. Interest rate risk encompasses exposures with respect to changes in the level of interest rates, the shape of the term structure of rates and the volatility of interest rates. Interest rate risk does not include exposure to changes in credit spreads.Sources of Interest Rate Risk The Company has exposure to interest rate risk arising from investments in fixed maturities and commercial mortgage loans, issuances by the Company of debt securities, preferred stock and similar securities, discount rate assumptions associated with the Company’s claim reserves and pension and other postretirement benefit obligations, and assets that support the Company's pension and other postretirement benefit plans.Impact Changes in interest rates from current levels can have both favorable and unfavorable effects for the Company.Change in Interest RatesFavorable EffectsUnfavorable EffectsÝ•Additional net investment income due to reinvesting at higher yields and higher yields on variable rate