Company: HIG-PG
Filing Date: 2025-02-21
Form Type: 10-K
Source: 0000874766-25-000023
Chunk: 1676

Company: HARTFORD INSURANCE GROUP, INC.
Filing Date: 2025-02-21
Form: 10-K
Item: Item 3
Chunk 1676
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 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 securities•Decrease in the fair value of the fixed income investment portfolioÞ•Increase in the fair value of the fixed income investment portfolio•Lower net investment income due to reinvesting at lower yields and lower yields on variable rate securities•Acceleration in paydowns and prepayments or calls of certain mortgage-backed and municipal securitiesManagement The Company primarily manages its exposure to interest