December 7, 2017

The Hartford Reports Third Quarter 2013 Financial Results

Hartford, CT -(BusinessWire)- The Hartford (NYSE:HIG) recently reported core earnings of $505 million for the three months ended Sept. 30, 2013 (third quarter 2013), up 17% from $433 million in third quarter 2012. Core earnings per diluted share rose 14% to $1.03 from $0.90 in third quarter 2012. The improvement from the prior year quarter was principally due to higher core earnings in P&C Commercial, Group Benefits, Talcott Resolution and Corporate.

The company reported third quarter 2013 net income of $293 million, or $0.60 per diluted share, which included realized capital losses of $105 million, after-tax, principally from variable annuity (VA) hedging programs, and an unlock charge of $67 million after-tax. Third quarter 2012 net income totaled $13 million, or $0.01 per diluted share, which included realized capital gains of $62 million, after-tax, principally from VA hedging programs, and an unlock charge of $79 million, after-tax. Third quarter 2012 net income was also impacted by a net loss of $388 million, after-tax, related to the company’s sale of its Individual Life business.

“The Hartford’s third quarter and year-to-date results demonstrate our significant progress transforming the company,” said The Hartford’s Chairman, President and CEO Liam E. McGee. “Margins are improving in our go-forward businesses, contributing to a 17% year-over-year increase in core earnings, and the company continues to reduce its overall risk profile. We are ahead of plan in executing the strategy we outlined in March 2012 and, with continued strong surrenders in Talcott, the variable annuity block is running off faster than anticipated.”

“With our focus on margin improvement, pricing in Property & Casualty Standard Commercial was a strong 8%, consistent with the past four quarters, and Group Benefits has meaningfully improved profitability over the last several quarters. Overall Property & Casualty written premiums were up 2%, with 2% growth in Small Commercial and Middle Market and 3% growth in Consumer Markets. Consumer Markets grew written premiums for the fourth consecutive quarter while expanding underlying margins. We are also pleased that Mutual Funds generated 35% sales growth and solid fund performance this quarter,” added McGee.

Third quarter 2013 net income and core earnings included the following items that increased net income and core earnings by a total of $87 million, after-tax, or $0.18 per diluted share, compared with items that increased net income and core earnings by a total of $133 million, after-tax, or $0.28 per diluted share, in third quarter 2012:

  • Third quarter 2013 catastrophe losses favorable to the company’s forecast by $43 million, after-tax, or $0.09 per diluted share compared with third quarter 2012 catastrophe losses favorable to forecast by $68 million, after-tax, or $0.14 per diluted share;
  • Third quarter 2013 unfavorable prior year loss and loss adjustment expense reserve development (PYD) of $11 million, after-tax, or $0.02 per diluted share, compared with third quarter 2012 favorable PYD of $21 million, after-tax, or $0.04 per diluted share;
  • A third quarter 2013 benefit of $18 million, after-tax, or $0.04 per diluted share, from the resolution of items under the company’s spin-off agreement with its former parent;
  • A $37 million, after-tax, or $0.08 per diluted share, third quarter 2013 insurance recovery from the company’s insurers for past legal expenses associated with closed litigation; and
  • Core earnings of $44 million, or $0.09 per diluted share, in third quarter 2012 from the Retirement Plans and Individual Life businesses that were sold in first quarter 2013.

PROPERTY & CASUALTY (CONSOLIDATED)
Third Quarter 2013 Highlights:

  • Combined ratio, before catastrophes and PYD, improved to 92.8 from 96.3 in third quarter 2012
  • Written premiums grew 2% over third quarter 2012
  • Core earnings declined 4% from third quarter 2012 due to higher catastrophe losses and unfavorable PYD

Third quarter 2013 P&C (Consolidated) net income was $264 million and core earnings were $263 million, decreases of 6% and 4%, respectively, from third quarter 2012. The decreases were primarily due to higher catastrophe losses in P&C Commercial and Consumer Markets and less favorable PYD in Consumer Markets, partially offset by an increase in current accident year margins before catastrophes. Third quarter 2013 combined ratio and underwriting gain were 96.2 and $95 million, respectively, compared with 95.4 and $115 million in third quarter 2012, reflecting the impact of these items.

Catastrophe losses totaled $66 million, before tax, in third quarter 2013, including $11 million, before tax, of unfavorable development on first half 2013 catastrophe losses. Third quarter 2012 catastrophe losses totaled $10 million, before tax, net of favorable development on first half 2012 catastrophe losses of $19 million, before tax.

Unfavorable PYD totaled $17 million, before tax, in third quarter 2013 compared with favorable PYD of $33 million, before tax, in third quarter 2012. Unfavorable PYD in third quarter 2013 included unfavorable PYD of $26 million from P&C Commercial and $2 million from P&C Other Operations. These amounts were partially offset by favorable PYD of $11 million from Consumer Markets, principally reflecting favorable PYD on catastrophes, including Storm Sandy.

Before catastrophes and PYD, the P&C (Consolidated) third quarter 2013 combined ratio improved to 92.8 compared with 96.3 in third quarter 2012, reflecting pricing and underwriting initiatives in the P&C Commercial and Consumer Markets segments.

Third quarter 2013 written premiums increased 2% over the prior year period, reflecting 1% growth in P&C Commercial Markets and 3% growth in Consumer Markets.

P&C Commercial
Third Quarter 2013 Highlights:

  • Underwriting gain improved to $30 million compared with $14 million in third quarter 2012 due to better current accident year results partially offset by higher catastrophes and unfavorable PYD
  • Standard Commercial renewal written pricing increased 8% in third quarter 2013, consistent with the last four quarters
  • Middle Market workers’ compensation and property written pricing each increased 9% during third quarter 2013

P&C Commercial underwriting gain was $30 million in third quarter 2013, a 114% increase from $14 million in third quarter 2012 due to better current accident year results in each of its three businesses (Small Commercial, Middle Market and Specialty), partially offset by higher catastrophe losses and an increase in unfavorable PYD. Third quarter 2013 catastrophe losses totaled $48 million, before tax, compared with $10 million, before tax, in third quarter 2012. The increase in catastrophe losses was largely driven by unfavorable development on second quarter 2013 catastrophes of $26 million before tax.

Unfavorable PYD increased to $26 million, before tax, in third quarter 2013 compared with $15 million, before tax, in third quarter 2012. Unfavorable PYD in third quarter 2013 was largely due to increased losses on commercial auto, which was largely offset by favorable development on general liability, workers’ compensation and prior year catastrophes. The company has experienced increased claims frequency and large loss severity, particularly in its Specialty Commercial auto book, and has taken actions to non-renew specific programs and policies to address this issue.

The combined ratio before catastrophes and PYD improved to 93.3 in third quarter 2013 compared with 97.5 in third quarter 2012, reflecting improved underwriting margins in Small Commercial, Middle Market and Specialty driven by the company’s pricing and underwriting initiatives since mid-year 2011. Before catastrophes and PYD, the third quarter 2013 combined ratio for Small Commercial was 87.1, a significant improvement from 92.6 in third quarter 2012, while Middle Market also improved to 95.9 from 100.7 in third quarter 2012 and Specialty improved to 103.0 from 105.0 in third quarter 2012.

Renewal written pricing in Standard Commercial, which is comprised of Small Commercial and Middle Market, remained strong in third quarter 2013, with rate increases in all business lines. Renewal written pricing increased 8% in Standard Commercial, consistent with the last four quarters. Middle Market renewal written pricing increases averaged 8%, including increases of 9% in both Middle Market workers’ compensation and property.

Written premiums grew 1% from $1,552 million in third quarter 2012 to $1,567 million in third quarter 2013, driven by growth in Small Commercial and Middle Market, which were each up 2%. Written premium growth reflects higher pricing on renewals in Small Commercial, stronger new business production in Middle Market and strong retention in both business lines. New business premium for Small Commercial and Middle Market totaled $222 million, up 14% from $195 million in third quarter 2012 driven by Middle Market property and general liability. Policy count retention in Small Commercial was 81% in third quarter 2013 compared with 84% in third quarter 2012. Middle Market policy count retention for third quarter 2013 was 80%, an improvement from 78% in third quarter 2012.

The complete earnings release is available here: The Hartford Third Quarter 2013 Financial Results

Source: BusinessWire

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