Business Dispositions

Sale of U.K. business

On May 10, 2017, the Company completed the sale of its U.K. property and casualty run-off subsidiaries, Hartford Financial Products International Limited and Downlands Liability Management Limited, in a cash transaction to Catalina Holdings U.K. Limited ("buyer"), for approximately $272, net of transaction costs. The Company's U.K. property and casualty run-off subsidiaries are included in the P&C Other Operations reporting segment. Revenues and earnings are not material to the Company's consolidated results of operations for the years ended December 31, 2017, 2016 and 2015.

The sale resulted in an after-tax capital loss from the transaction of $5 on the sale for the year ended December 31, 2016.

Major Classes of Assets and Liabilities Transferred by the Company to the Buyer in Connection with the Sale



	Carrying Value as of
	Closing		December 31, 2016 [2]
Assets
Cash and investments	$	669	$	657
Reinsurance recoverables and other [1]	268		213
Total assets held for sale	937		870
Liabilities
Reserve for future policy benefits and unpaid loss and loss adjustment expenses	653		600
Other liabilities	12		11
Total liabilities held for sale	$	665	$	611


[1]	Includes intercompany reinsurance recoverables of $71 as of December 31, 2016, settled in cash at closing.


[2]	Classified as assets and liabilities held for sale.

Discontinued Operations

Sale of life and annuity run-off business

On December 3, 2017, the Company’s wholly-owned subsidiary, Hartford Holdings, Inc. (HHI) entered into a definitive agreement to sell the Company's life and annuity run-off business, to a group of investors led by Cornell Capital LLC, Atlas Merchant Capital LLC, TRB Advisors LP, Global Atlantic Financial Group, Pine Brook and J. Safra Group. Under the terms of the sale agreement, the investor group will form a limited partnership that will acquire Hartford Life, Inc. (HLI), a holding company, and its life and annuity operating subsidiaries, for cash of approximately $1.4 billion after a pre-closing dividend to The Hartford of $300 and The Hartford will receive a 9.7% ownership interest in the limited partnership valued at a cost of $164. All equity investors of the limited partnership are restricted from selling their interest for five years. In addition, as part of the terms of the sale agreement, The Hartford will reduce its long-term debt by $142 because the debt, which was issued by HLI, will be included as part of the sale. Including cash proceeds and the retained equity interest and net of transaction costs, net proceeds for the sale are approximately $1.5 billion.

In addition, The Hartford will retain estimated tax benefits of the life and annuity run-off business totaling approximately $700 based on the newly enacted tax rate of 21%. The estimated retained tax benefits, which will be available for realization subject to the level and timing of The Hartford’s taxable income, include principally $437 of net operating loss carryovers and $235 of alternative minimum tax credits. The amount of net operating loss carryovers ultimately retained will be based on the tax basis of the operations sold. As a result of The Hartford's election to retain a portion of the net operating loss carryovers of the life and annuity run-off business, the Company did not recognize a tax benefit for the loss on sale.

Prior to the closing of the sale, the Company’s group benefits and mutual funds subsidiaries, which are currently subsidiaries of HLI, will be transferred from HLI to HHI and will not be part of the sale.

The transaction completes The Hartford’s exit from the life and annuity run-off businesses and is anticipated to close by June 30, 2018, subject to regulatory approval and other closing conditions. The life and annuity run-off operations meet the criteria for reporting as discontinued operations and are reported in the Corporate category.

For the year ended December 31, 2017, the Company has recognized an estimated loss on sale within discontinued operations of approximately $3.3 billion. Under the agreement, results from the discontinued operations inure to the buyer; therefore, the loss from discontinued operations during the period between signing and closing will remain largely unchanged as any income earned by the life and annuity run-off business will be offset by a higher loss on sale. At closing, shareholders’ equity will be further reduced for the amount of accumulated other comprehensive income (AOCI) of the life and annuity run-off business, which was approximately $1.0 billion as of December 31, 2017, largely consisting of net unrealized gains on investments, net of shadow DAC.

Following the sale, the Company will manage invested assets of the life and annuity run-off business for an initial term of five years and provide transition services for an estimated period of 12 to 24 months.

The following table summarizes the major classes of assets and liabilities of discontinued operations.

Major Classes of Assets and Liabilities to be Transferred to the Buyer in Connection with the Sale



	Carrying Value as of 12/31/2017			Carrying Value as of 12/31/2016
Assets
Cash and investments	$	30,135		$	31,433
Reinsurance recoverables	20,785			20,364
Loss accrual [1]	(3,257		)	—
Other assets	1,439			688
Separate account assets	115,834			115,665
Total assets held for sale	164,936			168,150
Liabilities
Reserve for future policy benefits and unpaid loss and loss adjustment expenses	$	14,482		$	13,609
Other policyholder funds and benefits payable	29,228			30,574
Long-term debt	142			142
Other liabilities	2,756			2,933
Separate account liabilities	115,834			115,665
Total liabilities held for sale	$	162,442		$	162,923


[1]	Represents the estimated accrued loss on sale of the Company's life and annuity run-off business.

To settle outstanding claims, the Company’s property and casualty operations previously bought structured settlements from the life and annuity run-off business held for sale. As of December 31, 2017 and 2016, the Company had $688 and $712, respectively, of liabilities for structured settlements in cases where the Company did not obtain a release of liability from the claimant which are included in liabilities held for sale. As the life and annuity run-off business will become a third party to the Company upon closing of the sale, as of December 31, 2017 and 2016, the accompanying consolidated balance sheets include a reinsurance recoverable from the life and annuity run-off business of $688 and $712, respectively, with corresponding unpaid loss and loss adjustment expense reserves of $688 and $712, respectively, representing the Company’s direct obligation to claimants.

The Hartford has guaranteed the obligations of certain life, accident and health and annuity contracts of the life and annuity run-off business written by Hartford Life Insurance Company ("HLIC") between 1990 and 1997and written by Hartford Life and Annuity Insurance Company ("HLAIC") between 1993 and 2009. After the sale closes, HLIC, HLAIC and the purchaser will indemnify the Company for any liability arising under the guarantees. The guarantees have no limitation as to maximum potential future payments. The Hartford has not recorded a liability and the likelihood for any payments under these guarantees is remote.

Reconciliation of the Major Line Items Constituting Pretax Profit (Loss) of Discontinued Operations



	For the years ended December 31,
	2017			2016			2015
Revenues
Earned premiums	$	106		$	114		$	92
Fee income and other	912			931			1,040
Net investment income	1,289			1,384			1,469
Net realized capital losses	(53		)	(158		)	(144		)
Total revenues	2,254			2,271			2,457
Benefits, losses and expenses
Benefits, losses and loss adjustment expenses	1,416			1,390			1,450
Amortization of DAC	45			146			138
Insurance operating costs and other expenses [1]	368			378			367
Total benefits, losses and expenses	1,829			1,914			1,955
Income before income taxes	425			357			502
Income tax expense	37			74			16
Income from operations of discontinued operations, net of tax	388			283			486
Net realized capital loss on disposal, net of tax	(3,257		)	—			—
(Loss) income from discontinued operations, net of tax	$	(2,869	)	$	283		$	486

[1]Corporate allocated overhead has been included in continuing operations.

Cash flows from discontinued operations included in the Consolidated Statement of Cash Flows were as follows:

Cash Flows from Discontinued Operations



	Year Ended December 31,
	2017			2016			2015
Net cash provided by operating activities from discontinued operations	$	797		$	784		$	682
Net cash provided by investing activities from discontinued operations	$	1,466		$	864		$	1,446
Net cash used in financing activities from discontinued operations [1]	$	(884	)	$	(647	)	$	(1,080	)
Cash paid for interest	$	11		$	11		$	11


[1]	Excludes return of capital to parent of $1,396, $752, and $1,001 for 2017, 2016 and 2015, respectively.