Earnings (Loss) Per Common Share

The following table presents a reconciliation of net income and shares used in calculating basic earnings (loss) per common share to those used in calculating diluted earnings (loss) per common share.



	Three Months Ended September 30,					Nine Months Ended September 30,
(In millions, except for per share data)	2012			2011		2012			2011
Earnings
Income (loss) from continuing operations
Income from continuing operations, net of tax	$	15		$	57	$	12		$	509
Less: Preferred stock dividends	10			10		31			31
Income (loss) from continuing operations, net of tax, available to common shareholders	5			47		(19		)	478
Add: Dilutive effect of preferred stock dividends	—			—		—			—
Income (loss) from continuing operations, net of tax, available to common shareholders and assumed conversion of preferred shares	$	5		$	47	$	(19	)	$	478
Income (loss) from discontinued operations, net of tax	$	(2	)	$	3	$	(4	)	$	85
Net income (loss)
Net income	$	13		$	60	$	8		$	594
Less: Preferred stock dividends	10			10		31			31
Net income (loss) available to common shareholders	3			50		(23		)	563
Add: Dilutive effect of preferred stock dividends	—			—		—			—
Net income (loss) available to common shareholders and assumed conversion of preferred shares	$	3		$	50	$	(23	)	$	563
Shares
Weighted average common shares outstanding, basic	435.8			445.3		438.2			445.0
Dilutive effect of warrants	23.8			27.4		—			34.8
Dilutive effect of stock compensation plans	2.1			0.7		—			1.2
Dilutive effect of mandatory convertible preferred shares	—			—		—			—
Weighted average shares outstanding and dilutive potential common shares	461.7			473.4		438.2			481.0
Earnings (loss) per common share
Basic
Income (loss) from continuing operations, net of tax, available to common shareholders	$	0.01		$	0.11	$	(0.04	)	$	1.07
Income (loss) from discontinued operations, net of tax	—			—		(0.01		)	0.20
Net income (loss) available to common shareholders	$	0.01		$	0.11	$	(0.05	)	$	1.27
Diluted
Income (loss) from continuing operations, net of tax, available to common shareholders	$	0.01		$	0.10	$	(0.04	)	$	0.99
Income (loss) from discontinued operations, net of tax	—			0.01		(0.01		)	0.18
Net income (loss) available to common shareholders	$	0.01		$	0.11	$	(0.05	)	$	1.17

2. Earnings (Loss) Per Common Share (continued)

For the three months ended September 30, 2012, 21.0 million shares for mandatory convertible preferred shares, along with the related dividend adjustment, would have been antidilutive to the earnings per share calculations. Assuming the impact of the mandatory convertible preferred shares was not antidilutive, weighted average common shares outstanding and dilutive potential common shares would have totaled 482.7 million for the three months ended September 30, 2012.

As a result of the losses available to common shareholders for the nine months ended September 30, 2012, the Company was required to use basic weighted average common shares outstanding in the calculation of diluted loss per share, since the inclusion of shares for warrants of 25.1 million, stock compensation plans of 1.9 million and mandatory convertible preferred shares, along with the related dividend adjustment, of 20.9 million, would have been antidilutive to the earnings (loss) per share calculations. In the absence of the losses, weighted average common shares outstanding and dilutive potential common shares would have totaled 486.1 million.

For the three and nine months ended September 30, 2011, 20.7 million and 20.8 million shares, respectively, for mandatory convertible preferred shares, along with the related dividend adjustment, would have been antidilutive to the earnings per share calculations. Assuming the impact of the mandatory convertible preferred shares was not antidilutive, weighted average common shares outstanding and dilutive potential common shares would have totaled 494.1 million and 501.8 million, for the three and nine months ended September 30, 2011, respectively.

The declaration of a quarterly common stock dividend of $0.10 during the first, second, and third quarters of 2012 triggered a provision in The Hartford’s Warrant Agreement with The Bank of New York Mellon, relating to warrants to purchase common stock issued in connection with the Company’s participation in the Capital Purchase Program, resulting in an adjustment to the warrant exercise price. The warrant exercise price at September 30, 2012, June 30, 2012, March 31, 2012 and December 31, 2011 was $9.622 $9.649, $9.676 and $9.699, respectively.

In addition, the declaration of a quarterly common stock dividend in the first quarter of 2012 triggered a provision in The Hartford’s Fixed Conversion Rate Agreement, relating to the Company’s mandatory convertible preferred stock, resulting in an adjustment to the minimum conversion rate to 29.8831 from 29.536 shares of Common Stock per share of Series F Preferred Stock and the maximum conversion rate to 36.4596 from 36.036 shares of Common Stock per share of Series F Preferred Stock.

On March 30, 2012 the Company entered into an agreement with Allianz and repurchased the outstanding Series B and Series C warrants. As a result, Allianz no longer holds potentially dilutive outstanding warrants. See Note 15 for additional information regarding the warrant repurchase.