HARTFORD, Conn.–(BUSINESS WIRE)– The Hartford (NYSE:HIG) reported third quarter 2011 net income of $0 million, or $(0.02) per diluted share. Third quarter 2010 net income was $666 million, or $1.34 per diluted share.
Third quarter 2011 core earnings were $33 million, or $0.05 per diluted share. In the third quarter of 2010, core earnings were $705 million, or $1.42 per diluted share. Weighted average diluted shares outstanding were 473.4 million in the third quarter of 2011 compared with 495.3 million in the third quarter of 2010.
“In the third quarter, the industry faced a combination of capital markets volatility and significant catastrophe claims,” said The Hartford’s Chairman, President and CEO Liam E. McGee. “These conditions were a good test for the improvements we have made throughout the organization, particularly in enterprise risk management. Despite the challenges, the underlying performance of the businesses was good, the investment portfolio held up well, and our capital position remained strong.
“We are using all the levers we control to improve profitability and help offset the impact of lower investment yields. These include pricing actions and creating a more efficient operating model across the businesses. We are encouraged by the continued momentum in renewal written price increases in P&C Commercial. In Wealth Management, we are diversifying product offerings and distribution channels to drive profitability,” added McGee.
The third quarter of 2011 included the following items that reduced both core earnings and net income by $408 million and $697 million, respectively:
- A negative DAC unlock charge of $227 million after tax, included in core earnings. This charge includes the company’s annual assumptions review and the impact of lower estimated future gross profits due to lower account values resulting from the decline in global equity market values. The DAC unlock charge reduced net income by $516 million after tax;
- Current accident year catastrophe losses of $134 million after tax, or 8.3 points on the property and casualty combined ratio for P&C Commercial and Consumer Markets;
- Reestimation of current accident year losses in Commercial Markets of $31 million after tax, or 3.0 points on the P&C Commercial combined ratio;
- A $14 million after-tax charge related to assessments in connection with the liquidation of Executive Life Insurance Company of New York; and
- Prior year reserve strengthening of $2 million after tax, including a $12 million after-tax charge due to environmental reserve strengthening resulting from the company’s annual review of its legacy environmental liabilities.
Third Quarter 2011 Highlights:
- P&C Commercial written premiums increased 7% from the third quarter of 2010, reflecting renewal written price increases, strong retention and increased exposures;
- P&C Commercial combined ratio of 99.4% included 3.0 points for reestimation of current accident losses for the first half of 2011; and
- Group Benefits loss ratio of 80.1% compared with 77.1% in the third quarter of 2010, reflecting less favorable life mortality and continued elevated disability claims incidence.
Commercial Markets net income was $77 million in the third quarter of 2011 compared with $352 million in the third quarter of 2010. Core earnings for the division were $106 million in the third quarter of 2011 compared with $338 million in the third quarter of 2010.
P&C Commercial core earnings totaled $86 million in the third quarter of 2011, down from $294 million in the third quarter of 2010 as a result of higher catastrophe losses, reduced favorable prior accident year development and higher current accident year loss costs. Catastrophe losses in the current quarter totaled $93 million before tax, or 6.0 points on the P&C Commercial combined ratio, compared with $13 million before tax, or 0.9 points, in the third quarter of 2010. This quarter’s catastrophe losses included $57 million before tax, resulting from Hurricane Irene. Prior accident year development declined from a favorable $118 million before tax in the third quarter of 2010 to $9 million before tax in the third quarter of 2011.
Excluding catastrophes and prior year development, the combined ratio was 99.4% in the third quarter of 2011, up from 92.2% in the third quarter of 2010.
The increase in the third quarter of 2011 combined ratio reflects higher loss costs, including higher non-cat property losses and adverse current accident year development related to the first half of 2011 of $47 million before tax, or 3.0 points on the combined ratio, principally due to increased frequency trends in workers’ compensation.
Group Benefits core earnings in the third quarter of 2011 were $20 million compared with $44 million in the third quarter of 2010, reflecting sustained elevated group disability claims and less favorable life mortality. Fully insured premium of $1.0 billion declined 4% from the third quarter of 2010, as a result of the competitive market environment, continued soft employment conditions and the company’s efforts to increase pricing. The loss ratio was 80.1% in the third quarter of 2011 compared with 77.1% in the third quarter of 2010 due to an increase in the group life loss ratio resulting from less favorable and continued elevated disability incidence levels in the current year third quarter.
The Complete earnings release is available here: The Hartford Third Quarter 2011 Earnings.