The Company utilizes a variety of OTC, OTC-cleared and exchange traded derivative instruments as a part of its overall risk management strategy as well as to enter into replication transactions. Derivative instruments are used to manage risk associated with interest rate, equity market, credit spread, issuer default, price, and currency exchange rate risk or volatility. 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.

Strategies that Qualify for Hedge Accounting

Some of the Company's derivatives satisfy hedge accounting requirements as outlined in Note 1 - Basis of Presentation and Significant Accounting Policies of Notes to Consolidated Financial Statements, included in The Hartford’s 2017 Form 10-K Annual Report. Typically, these hedging instruments include interest rate swaps and, to a lesser extent, foreign currency swaps where the terms or expected cash flows of the hedged item closely match the terms of the swap. The interest rate swaps are typically used to manage interest rate duration of certain fixed maturity securities. The hedge strategies by hedge accounting designation include:

Cash Flow Hedges

Interest rate swaps are predominantly used to manage portfolio duration and better match cash receipts from assets with cash disbursements required to fund liabilities. These derivatives primarily convert interest receipts on floating-rate fixed maturity securities to fixed rates. The Company has also entered into interest rate swaps to convert the variable interest payments on the 3 month Libor + 2.125% junior subordinated debt to fixed interest payments. For further information, see the Junior Subordinated Debentures section within Note 13 - Debt of Notes to the Consolidated Financial Statements, included in The Hartford's 2017 Form 10-K Annual Report.

Foreign currency swaps are used to convert foreign currency-denominated cash flows related to certain investment receipts to U.S. dollars in order to reduce cash flow fluctuations due to changes in currency rates.

The Company also previously entered into forward starting swap agreements to hedge the interest rate exposure related to the future purchase of fixed-rate securities, primarily to hedge interest rate risk inherent in the assumptions used to price certain group benefits liabilities.

Non-qualifying Strategies

Derivative relationships that do not qualify for hedge accounting (“non-qualifying strategies”) primarily include hedging and replication strategies that utilize credit default swaps. In addition, hedges of interest rate, foreign currency and equity risk of certain fixed maturities and equities do not qualify for hedge accounting. The non-qualifying strategies include:

Credit Contracts

Credit default swaps are used to purchase credit protection on an individual entity or referenced index to economically hedge against default risk and credit-related changes in the value of fixed maturity securities. Credit default swaps are also used to assume credit risk related to an individual entity or referenced index as a part of replication transactions. These contracts require the Company to pay or receive a periodic fee in exchange for compensation from the counterparty should the referenced security issuers experience a credit event, as defined in the contract. The Company also enters into credit default swaps to terminate existing credit default swaps, thereby offsetting the changes in value of the original swap going forward.

Interest Rate Swaps, Swaptions and Futures

The Company uses interest rate swaps, swaptions and futures to manage interest rate duration between assets and liabilities in certain investment portfolios. In addition, the Company enters into interest rate swaps to terminate existing swaps, thereby offsetting the changes in value of the original swap going forward. As of June 30, 2018 and December 31, 2017, the notional amount of interest rate swaps in offsetting relationships was $8.1 billion and $7.3 billion, respectively.

Foreign Currency Swaps and Forwards

The Company enters into foreign currency swaps to convert the foreign currency exposures of certain foreign currency-denominated fixed maturity investments to U.S. dollars. The Company may at times enter into foreign currency forwards to hedge non-U.S. dollar denominated cash and, previously, equity securities. The Company previously entered into foreign currency forwards to hedge currency impacts on changes in equity of the U.K. property and casualty run-off subsidiaries that were sold in May 2017. For further information on the disposition, see Note 2 - Business Acquisitions of Notes to Consolidated Financial Statements, included in The Hartford's 2017 Form 10-K Annual Report.

Equity Index Options

The Company enters into equity index options to hedge the impact of a decline in the equity markets on the investment portfolio. The Company also enters into call options on equity securities to generate additional return.

Derivative Balance Sheet Classification

For reporting purposes, the Company has elected to offset within assets or liabilities based upon the net of the fair value amounts, income accruals, and related cash collateral receivables and payables of OTC derivative instruments executed in a legal entity and with the same counterparty under a master netting agreement, which provides the Company with the legal right of offset. The following fair value amounts do not include income accruals or related cash collateral receivables and payables, which are netted with derivative fair value amounts to determine balance sheet presentation. The Company’s derivative instruments are held for risk management purposes, unless otherwise noted in the following table. The notional amount of derivative contracts represents the basis upon which pay or receive amounts are calculated and is presented in the table to quantify the volume of the Company’s derivative activity. Notional amounts are not necessarily reflective of credit risk.



Derivative Balance Sheet Presentation
	Net Derivatives										Asset Derivatives [1]				Liability Derivatives [1]
	Notional Amount				Fair Value						Fair Value				Fair Value
Hedge Designation/ Derivative Type	Jun. 30, 2018		Dec. 31, 2017		Jun. 30, 2018			Dec. 31, 2017			Jun. 30, 2018		Dec. 31, 2017		Jun. 30, 2018			Dec. 31, 2017
Cash flow hedges
Interest rate swaps	$	2,120	$	2,190	$	—		$	—		$	—	$	1	$	—		$	(1	)
Foreign currency swaps	153		153		(12		)	(13		)	1		—		(13		)	(13		)
Total cash flow hedges	2,273		2,343		(12		)	(13		)	1		1		(13		)	(14		)
Non-qualifying strategies
Interest rate contracts
Interest rate swaps and futures	8,849		7,986		(59		)	(83		)	5		7		(64		)	(90		)
Foreign exchange contracts
Foreign currency swaps and forwards	341		213		—			(1		)	1		—		(1		)	(1		)
Credit contracts
Credit derivatives that purchase credit protection	6		61		—			1			—		2		—			(1		)
Credit derivatives that assume credit risk [2]	973		823		10			3			12		3		(2		)	—
Credit derivatives in offsetting positions	51		1,046		—			2			7		11		(7		)	(9		)
Equity contracts
Equity index swaps and options	136		258		1			1			1		1		—			—
Total non-qualifying strategies	10,356		10,387		(48		)	(77		)	26		24		(74		)	(101		)
Total cash flow hedges and non-qualifying strategies	$	12,629	$	12,730	$	(60	)	$	(90	)	$	27	$	25	$	(87	)	$	(115	)
Balance Sheet Location
Fixed maturities, available-for-sale	$	153	$	153	$	—		$	—		$	—	$	—	$	—		$	—
Other investments	2,022		9,957		15			10			20		16		(5		)	(6		)
Other liabilities	10,454		2,620		(75		)	(100		)	7		9		(82		)	(109		)
Total derivatives	$	12,629	$	12,730	$	(60	)	$	(90	)	$	27	$	25	$	(87	)	$	(115	)


[1]	Certain prior year amounts have been restated to conform to the current year presentation for OTC-cleared derivatives.


[2]	The derivative instruments related to this strategy are held for other investment purposes.

Offsetting of Derivative Assets/Liabilities

The following tables present the gross fair value amounts, the amounts offset, and net position of derivative instruments eligible for offset in the Company's Condensed Consolidated Balance Sheets. Amounts offset include fair value amounts, income accruals and related cash collateral receivables and payables associated with derivative instruments that are traded under a common master netting agreement, as described in the preceding discussion. Also included in the tables are financial collateral receivables and payables, which are contractually permitted to be offset upon an event of default, although are disallowed for offsetting under U.S. GAAP.



Offsetting Derivative Assets and Liabilities
	(i)			(ii)			(iii) = (i) - (ii)						(iv)				(v) = (iii) - (iv)
							Net Amounts Presented in the Statement of Financial Position							Collateral Disallowed for Offset in the Statement of Financial Position
	Gross Amounts of Recognized Assets (Liabilities) [1]			Gross Amounts Offset in the Statement of Financial Position			Derivative Assets [2] (Liabilities) [3]			Accrued Interest and Cash Collateral (Received) [4] Pledged [3]				Financial Collateral (Received) Pledged [5]			Net Amount
As of June 30, 2018
Other investments	$	27		$	22		$	15		$	(10	)		$	3		$	2
Other liabilities	$	(87	)	$	(11	)	$	(75	)	$	(1	)		$	(68	)	$	(8	)
As of December 31, 2017
Other investments	$	25		$	22		$	10		$	(7	)		$	1		$	2
Other liabilities	$	(115	)	$	(10	)	$	(100	)	$	(5	)		$	(96	)	$	(9	)


[1]	Certain prior year amounts have been restated to conform to the current year presentation for OTC-cleared derivatives.


[2]	Included in other investments in the Company's Condensed Consolidated Balance Sheets.


[3]	Included in other liabilities in the Company's Condensed Consolidated Balance Sheets and is limited to the net derivative payable associated with each counterparty.


[4]	Included in other investments in the Company's Condensed Consolidated Balance Sheets and is limited to the net derivative receivable associated with each counterparty.


[5]	Excludes collateral associated with exchange-traded derivative instruments.

Cash Flow Hedges

For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of OCI and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing hedge ineffectiveness are recognized in current period earnings. All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.



Derivatives in Cash Flow Hedging Relationships
	Gain (Loss) Recognized in OCI on Derivative (Effective Portion)
	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Interest rate swaps	$	(2	)	$	17		$	(16	)	$	14
Foreign currency swaps	8			(4		)	1			(4		)
Total	$	6		$	13		$	(15	)	$	10

	Gain (Loss) Reclassified from AOCI into Income (Effective Portion)
	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Interest rate swaps
Net realized capital gains	$	—		$	1		$	1		$	5
Net investment income	9			10			17			19
Total	$	9		$	11		$	18		$	24

During the three and six months ended June 30, 2018, and June 30, 2017, the Company had no ineffectiveness recognized in income within net realized capital gains (losses).

As of June 30, 2018, the before tax deferred net gains on derivative instruments recorded in AOCI that are expected to be reclassified to earnings during the next twelve months are $26. This expectation is based on the anticipated interest payments on hedged investments in fixed maturity securities that will occur over the next twelve months, at which time the Company will recognize the deferred net gains (losses) as an adjustment to net investment income over the term of the investment cash flows.

During the three and six months ended June 30, 2018, and June 30, 2017, the Company had no net reclassifications from AOCI to earnings resulting from the discontinuance of cash-flow hedges due to forecasted transactions that were no longer probable of occurring.

Non-Qualifying Strategies

For non-qualifying strategies, including embedded derivatives that are required to be bifurcated from their host contracts and accounted for as derivatives, the gain or loss on the derivative is recognized currently in earnings within net realized capital gains (losses).



Non-Qualifying Strategies Recognized within Net Realized Capital Gains (Losses)
	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Foreign exchange contracts
Foreign currency swaps and forwards	$	4		$	(7	)	$	1		$	(14	)
Other non-qualifying derivatives
Interest rate contracts
Interest rate swaps, swaptions, and futures	8			(7		)	6			(2		)
Credit contracts
Credit derivatives that purchase credit protection	1			23			—			18
Credit derivatives that assume credit risk	—			(16		)	(8		)	(7		)
Equity contracts
Equity index swaps and options	(1		)	1			—			—
Other
Contingent capital facility put option	—			—			—			(1		)
Total other non-qualifying derivatives	8			1			(2		)	8
Total [1]	$	12		$	(6	)	$	(1	)	$	(6	)


[1]	Excludes investments that contain an embedded credit derivative for which the Company has elected the fair value option. For further discussion, see the Fair Value Option section in Note 5 - Fair Value Measurements.

Credit Risk Assumed through Credit Derivatives

The Company enters into credit default swaps that assume credit risk of a single entity or referenced index in order to synthetically replicate investment transactions that are permissible under the Company's investment policies. The Company will receive periodic payments based on an agreed upon rate and notional amount and will only make a payment if there is a credit event. A credit event payment will typically be equal to the notional value of the swap contract less the value of the referenced security issuer’s debt obligation after the occurrence of the credit event. A credit event is generally defined as a default on contractually obligated interest or principal payments or bankruptcy of the referenced entity. The credit default swaps in which the Company assumes credit risk primarily reference investment grade single corporate issuers and baskets, which include standard diversified portfolios of corporate and CMBS issuers. The diversified portfolios of corporate issuers are established within sector concentration limits and may be divided into tranches that possess different credit ratings.



Credit Risk Assumed Derivatives by Type
							Underlying Referenced Credit Obligation(s) [1]
	Notional Amount [2]		Fair Value			Weighted Average Years to Maturity	Type	Average Credit Rating	Offsetting Notional Amount [3]		Offsetting Fair Value [3]
As of June 30, 2018
Single name credit default swaps
Investment grade risk exposure	$	169	$	3		5 years	Corporate Credit/ Foreign Gov.	A-	$	—	$	—
Basket credit default swaps [4]
Investment grade risk exposure	794		7			6 years	Corporate Credit	BBB+	—		—
Investment grade risk exposure	12		—			5 years	CMBS Credit	A-	2		—
Below investment grade risk exposure	24		(6		)	Less than 1 year	CMBS Credit	CCC	24		6
Total [5]	$	999	$	4					$	26	$	6
As of December 31, 2017
Single name credit default swaps
Investment grade risk exposure	$	130	$	3		5 years	Corporate Credit/ Foreign Gov.	A-	$	—	$	—
Below investment grade risk exposure	9		—			Less than 1 year	Corporate Credit	B	9		—
Basket credit default swaps [4]
Investment grade risk exposure	1,137		2			3 years	Corporate Credit	BBB+	454		(2		)
Below investment grade risk exposure	27		2			3 years	Corporate Credit	B+	27		—
Investment grade risk exposure	13		(1		)	5 years	CMBS Credit	A	3		—
Below investment grade risk exposure	30		(6		)	Less than 1 year	CMBS Credit	CCC	30		7
Total [5]	$	1,346	$	—					$	523	$	5


[1]	The average credit ratings are based on availability and are generally the midpoint of the available ratings among Moody’s, S&P, Fitch and Morningstar. If no rating is available from a rating agency, then an internally developed rating is used.


[2]	Notional amount is equal to the maximum potential future loss amount. These derivatives are governed by agreements and applicable law, which include collateral posting requirements. There is no additional specific collateral related to these contracts or recourse provisions included in the contracts to offset losses.


[3]	The Company has entered into offsetting credit default swaps to terminate certain existing credit default swaps, thereby offsetting the future changes in value of, or losses paid related to, the original swap.


[4]	Comprised of swaps of standard market indices of diversified portfolios of corporate and CMBS issuers referenced through credit default swaps. These swaps are subsequently valued based upon the observable standard market index.


[5]	Excludes investments that contain an embedded credit derivative for which the Company has elected the fair value option. For further discussion, see the Fair Value Option section in Note 5 - Fair Value Measurements.

Derivative Collateral Arrangements

The Company enters into various collateral arrangements in connection with its derivative instruments, which require both the pledging and accepting of collateral. As of June 30, 2018 and December 31, 2017, the Company pledged cash collateral with a fair value of $1 associated with derivative instruments. The collateral receivable has been recorded in other assets or other liabilities on the Company's Condensed Consolidated Balance Sheets as determined by the Company's election to offset on the balance sheet. As of June 30, 2018 and December 31, 2017, the Company also pledged securities collateral associated with derivative instruments with a fair value of $72 and $101, respectively, which have been included in fixed maturities on the Condensed Consolidated Balance Sheets. In addition, as of June 30, 2018 and December 31, 2017, the Company has also pledged initial margin of securities related to OTC- cleared and exchange traded derivatives with a fair value of $84 and $96, respectively, which are included within fixed maturities on the Company's Condensed Consolidated Balance Sheets. The counterparties generally have the right to sell or re-pledge these securities.

As of June 30, 2018 and December 31, 2017, the Company accepted cash collateral associated with derivative instruments of $11 which was invested and recorded in the Company's Condensed Consolidated Balance Sheets in fixed maturities and short-term investments with corresponding amounts recorded in other investments or other liabilities as determined by the Company's election to offset on the balance sheet. The Company also accepted securities collateral as of June 30, 2018 and December 31, 2017, with a fair value of $4 and $2, none of which the Company has the ability to sell or repledge. As of June 30, 2018 and December 31, 2017, the Company had no repledged securities and did not sell any securities held as collateral. In addition, as of June 30, 2018 and December 31, 2017, non-cash collateral accepted was held in separate custodial accounts and was not included in the Company’s Consolidated Balance Sheets.