Hartford, CT -(BUSINESS WIRE)- The Hartford (NYSE:HIG) reported net income of $96 million, or $0.18 per diluted share for the first quarter of 2012 compared with $501 million, or $0.99 per diluted share, in the first quarter of 2011. First quarter 2012 core earnings rose 7% to $612 million from $574 million in the first quarter of 2011. First quarter 2012 core earnings per diluted share rose 11% to $1.25 compared with $1.13 in the first quarter of 2011.
“The Hartford reported strong first quarter financial results,” said Liam E. McGee, chairman, president and CEO. “P&C Commercial’s pricing momentum continued and retention remained strong. Consumer Markets had favorable margins and new business trends, while Mutual Fund assets under management and sales increased from year-end levels. Group Benefits has multiple initiatives underway to improve profitability.”
“We also had several strategic accomplishments in the quarter, most significantly our decision to focus on the property and casualty, group benefits and mutual funds businesses to deliver superior performance and greater shareholder value. We are executing on the plan we announced; pursuing opportunities for the Life runoff segment and initiating the sales processes for Individual Life, Retirement Plans and Woodbury Financial Services, which are proceeding well. We also repurchased the Allianz debt and warrants in April, reducing interest expense and improving financial flexibility,” added McGee.
The company’s first quarter 2012 core earnings included the following items that, in total, increased core earnings by $165 million, or $0.34 per diluted share (all items are presented after tax):
- Net prior year Property and Casualty (P&C) loss and loss adjustment expense reserve releases of $19 million, or $0.04 per diluted share, in Commercial Markets, Consumer Markets and P&C Other Operations;
- DAC unlock benefit of $192 million, or $0.39 per diluted share, in Wealth Management and Life Other Operations; the DAC unlock benefit included in net income was $214 million; and
- Net current accident year catastrophe losses of $46 million, or $0.09 per diluted share, in Commercial Markets and Consumer Markets.
 On a net income basis, the listed items in total increased net income by $123 million, or $0.25 per diluted share; the weighted average diluted share count used for calculating core earnings was 489.9 million and 469.0 million for net income.
First Quarter 2012 Highlights:
- P&C Commercial written premiums grew 3% due to higher pricing, strong retention and increased exposures
- Renewal written price increases averaged 7% in Small Commercial and Middle Market and 14% in Middle Market workers’ compensation
- Group Benefits core earnings were $5 million, reflecting unfavorable long-term disability results
Commercial Markets net income declined to $207 million in the first quarter of 2012 from $334 million in the first quarter of 2011 and core earnings decreased to $167 million from $196 million in the first quarter of 2011.
P&C Commercial core earnings were $162 million in the first quarter of 2012, an 8% decrease from $177 million in the first quarter of 2011 primarily due to lower underwriting results*. The combined ratio, excluding catastrophes and prior year development, increased to 96.4% in the first quarter of 2012 compared with 95.3% in the first quarter of 2011, reflecting lower workers’ compensation profitability. Unfavorable prior year reserve development was $13 million, after tax, in the first quarter of 2012 compared with favorable development of $4 million, after tax, in the first quarter of 2011. First quarter 2012 catastrophe results were $21 million, after tax, compared with $29 million, after tax, in the first quarter of 2011.
P&C Commercial continued to benefit from strong renewal written pricing trends, which averaged 7% in Small Commercial and Middle Market in the first quarter of 2012, the highest level in over eight years. Middle Market workers’ compensation renewal pricing increases averaged 14% in the quarter, reflecting management’s disciplined rate initiatives in that book of business. Retention remained strong at 84% in small commercial and 79% in middle market.
Group Benefits core earnings in the first quarter of 2012 declined to $5 million compared with $19 million in the first quarter of 2011 due to unfavorable disability results. The loss ratio rose to 83.0% in the first quarter of 2012 compared with 79.3% in the first quarter of 2011 reflecting continued elevated long-term disability claims incidence and lower terminations. First quarter 2012 fully insured premium in Group Benefits declined 7% to $954 million compared with the first quarter of 2011 due to lower persistency resulting from the company’s targeted pricing initiatives as well as the competitive market environment.
The complete earnings release is available here: The Hartford First Quarter 2012 Financial Results