Book Value per Diluted Share (excluding AOCI)- This is a non-GAAP per share measure that is
•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.
Policy Count Retention- Represents the ratio of the number of policies renewed during the period divided by the number of policies available to renew. The number of policies available to renew represents the number of policies, net of any cancellations, written in the previous policy term. 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.
For the year ended December 31, 2020, we recorded direct COVID-19 incurred losses in P&C of $278, reflecting management’s best estimate of the ultimate cost of settling COVID-19 claims incurred, including $141 for property claims, $66 for workers’ compensation, net of favorable frequency on other workers' compensation claims, and $71 of incurred losses largely concentrated in financial lines such as D&O and E&O and in surety and marine.
•Lower yield on fixed maturity investments resulting from lower reinvestment rates and lower yields on floating rate securities, partially offset by a higher level of invested assets, due in part to the acquisition of Navigators Group.
For further discussion of impacts resulting from the COVID-19 pandemic, refer to the impact of COVID-19 on our financial
Group Benefits and middle & large commercial, partially offset by Personal Lines technology expenses incurred in 2019. In addition, 2020 included a full year of operating costs incurred due to the Navigators Group acquisition in May of 2019, partially offset by lower integration and transaction costs in 2020.
Average reinvestment rate, on fixed maturities and mortgage loans, excluding certain U.S. Treasury securities, for the
For the 2021 calendar year, we expect the annualized net investment income yield, excluding limited partnerships and other alternative investments and non-routine items on fixed maturities, to be lower than the portfolio yield earned for the year ended December 31, 2020, due to a lower yield on short-term investments and lower reinvestment rates. The estimated impact on net investment income yield is subject to change due to evolving market conditions and active portfolio management.
[1]The net unrealized gains (losses) on equity securities included in net realized capital gains (losses) related to equity securities still held as of December 31, 2020, were $53 for the year-ended December 31, 2020. The net unrealized gains (losses) on equity securities included in net realized capital gains (losses) related to equity securities still held as of December 31, 2019, were $164 for the year-ended December 31, 2019. The net unrealized gains (losses) on equity securities included in net realized capital gains (losses) related to equity securities still held as of December 31, 2018, were $(80) for the year-ended December 31, 2018.
The table below shows the range of annual reserve re-estimates experienced by The Hartford over the past ten years. The amount of prior accident year development (as shown in the reserve rollforward) for a given calendar year is expressed as a percent of the beginning calendar year reserves, net of reinsurance. The ranges presented are significantly influenced by the facts and circumstances of each particular year and by the fact that only the last ten years are included in the range. Accordingly, these percentages are not intended to be a prediction of the range of possible future variability. For further discussion of the potential for variability in recorded loss reserves, see Preferred Reserving Methods by Line of Business and Impact of Key Assumptions on Reserves sections.
growth in our general industries book of business driven by new business growth and an increase in insured exposures and that we will generate new business growth in specialized industries as well as with large and complex solutions. In global specialty, premium growth in 2021 is expected primarily in wholesale and financial lines benefiting from written pricing increases.
The Company expects the Commercial Lines combined ratio will be between approximately 93.5 and 95.5 for 2021, compared to 100.4 in 2020, primarily due to lower current accident year catastrophe losses expected in 2021 and lower COVID-19 incurred claims. The underlying combined ratio is expected to be lower as fewer COVID-19 claims are expected in 2021 as we emerge from the pandemic. Apart from lower expected COVID-19 claims, earned pricing increases in excess of moderate increases in loss costs in most lines will be partially offset by continued margin compression in small commercial workers’ compensation, while the expense ratio is expected to improve by nearly a point. Current accident year catastrophes are assumed to be 3.1 points of the combined ratio in 2021 compared to 4.5 points in 2020.
[1]The loss estimates represent total property losses for hurricane events and property and workers compensation losses for earthquake events resulting from a single event. The estimates provided are based on 250-year return period loss estimates that have a 0.4% likelihood of being exceeded in any single year. The net loss estimates provided assume that the Company is able to recover all losses ceded to reinsurers under its reinsurance programs. The Company also manages natural catastrophe risk for group life and group disability, which in combination with property and workers compensation loss estimates are subject to separate enterprise risk management net aggregate loss limits as a percent of enterprise surplus.
Investments Essentially all of the Company's invested assets are subject to credit risk. In 2020, net credit losses on fixed maturities, AFS and the increase (decrease) in ACL on mortgage loans were $28 and $19 respectively. In 2019. credit related impairments were $3 and there were no mortgage loans that had a valuation allowance. (See the Investment Portfolio Risk section of Financial Risk Management under “Credit Losses on Fixed Maturities, AFS and Intent-to-Sell Impairments" and "ACL on Mortgage Loans”).
Assets supporting pension plan Changes in relative values between currencies can positively or negatively impact unrealized gains and losses in AOCI. Unrealized gains and losses in AOCI are amortized into the actuarial loss component of net periodic benefit cost when they exceed a threshold. As of December 31, 2020 and 2019, the Company had pension plan assets of $95 and $83, respectively, of non-U.S. dollar investments in multiple currencies. These amounts are excluded from the sensitivity analysis below.
[1]Represents the ACL recorded 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 of Notes to Consolidated Financial Statements.
2020, particularly during March and April, largely due to the unprecedented reduction in demand stemming from the global pandemic as well as a decision by Saudi Arabia to raise production despite declining demand. The uncertain outlook caused credit spreads to widen for corporate and sovereign issuers that participate in the exploration, production, transportation and refining of oil and gas. Subsequently, OPEC Plus' agreement to reduce production in combination with recovering demand from economic re-openings has contributed to a strong recovery in oil prices to average levels for the post 2014 cycle. With the stabilization of oil prices, credit spreads have recovered
meaningfully. Ultimately, the impact of price volatility in the Company’s energy sector investments will be determined by the durability of the recovery in energy prices and the ability of issuers to maintain liquidity, manage indebtedness, and navigate changing regulations and growing consolidation trends within the industry.
[2]Leasing revenue bonds are generally the obligations of a financing authority established by the municipality that leases facilities back to a municipality. The notes are typically secured by lease payments made by the municipality that is leasing the facilities financed by the issue. Lease payments may be subject to annual appropriation by the municipality or the municipality may be obligated to appropriate general tax revenues to make lease payments.
There are no current restrictions on HFSG Holding Company's ability to pay dividends to its stockholders.
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 statutory 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 period ending on the thirty-first day of December last preceding, in each case determined under
In 2020, HFSG Holding Company received $350 of dividends from HLA and $127 from Hartford Funds. In addition, HFSG Holding Company received $900 of net dividends from P&C subsidiaries in 2020 which excludes $50 of P&C dividends that were subsequently contributed to a run-off P&C subsidiary and $78 of P&C dividends related to interest payments on an intercompany note owed by Hartford Holdings, Inc. ("HHI") to Hartford Fire Insurance Company.
For further information regarding Shelf Registrations, see Note 14 - Debt of Notes to Consolidated Financial Statements.
The Company does not have any off-balance sheet arrangements that are reasonably likely to have a material effect on the financial condition, results of operations, liquidity, or capital resources of the Company, except for unfunded commitments to purchase investments in limited partnerships and other alternative investments, private placements, and mortgage loans as disclosed in Note 15 - Commitments and Contingencies of Notes to Consolidated Financial Statements.
•Under U.S. GAAP, the Company is only permitted to discount reserves for losses and loss adjustment expenses in cases where the payment pattern and ultimate loss costs are fixed and determinable on an individual claim basis. For the Company, these include claim settlements with permanently disabled claimants. As of December 31, 2020, the total property and casualty reserves in the above table are gross of a reserve discount of $367.