Hartford, CT -(BusinessWire)- The Hartford (NYSE:HIG) reported a net loss of $46 million, or $0.13 per diluted share, for the three months ended Dec. 31, 2012 (fourth quarter 2012) compared with net income of $118 million, or $0.23 per diluted share, for the quarter ended Dec. 31, 2011 (fourth quarter 2011). The decline in net income compared to the prior year quarter was due to higher catastrophe losses, largely from Storm Sandy, restructuring and other costs, hedging losses on runoff annuity blocks, and increased net realized capital losses due to the sales of the Retirement Plans and Individual Life businesses.
Fourth quarter 2012 core earnings** declined to $265 million, or $0.54 per diluted share, from $301 million, or $0.61 per diluted share, in the fourth quarter of 2011. The decrease in fourth quarter 2012 results was due to higher catastrophe losses as a result of Storm Sandy in the company’s Property & Casualty (P&C) operations which were offset by improved results in Group Benefits, Corporate and Talcott Resolution, which is comprised of the company’s legacy Wealth Management runoff businesses, as well as the Individual Life and Retirement Plans businesses that were sold in January, 2013.
The company also announced that it has reviewed with the Connecticut Insurance Department its capital management plans and that it has received approval from the Department for a $1.2 billion extraordinary dividend from its Connecticut domiciled life insurance companies. In addition, it expects to dissolve the company’s Vermont life reinsurance captive and return approximately $300 million of surplus to the holding company. These actions are expected to be completed by the end of the first quarter of 2013.
*Denotes financial measures not calculated based on generally accepted accounting principles (“non-GAAP”).
**The company changed the calculation of core earnings in the fourth quarter of 2012.
The company also announced that it expects to reduce debt by approximately $1 billion, including the repayment of the 2013 and 2014 debt maturities totaling $520 million. In addition, The Hartford’s Board of Directors has authorized a $500 million share repurchase program, expiring at Dec. 31, 2014.
“The Hartford had a strong finish to 2012 and the fourth quarter concluded a year of strategic accomplishments for the company,” said The Hartford’s Chairman, President and Chief Executive Officer Liam E. McGee. “Following the successful close of the sales of the life businesses, we enter 2013 with a sharper focus on the P&C, Group Benefits and Mutual Funds businesses. We are also very pleased to share our capital management plans, which will be accretive to shareholders and effectively balance a number of critical goals for The Hartford, including paying down debt, returning capital to shareholders and further strengthening our financial flexibility to take actions to reduce risk in the legacy annuity liabilities.”
“In the fourth quarter, pricing continued to improve across our P&C and Group Benefits businesses, with P&C Standard Commercial renewal written price increases of 9%. Group Benefits core earnings were up significantly in the fourth quarter. Consumer Markets achieved a combined ratio improvement of 2.4 points, excluding catastrophes and prior year development. I also want to express my appreciation for the professionalism and dedication demonstrated by my Hartford colleagues in response to Storm Sandy,” added McGee.
The company also reported net income for the year ended Dec. 31, 2012 of $350 million, or $0.66 per diluted share, compared with 2011 net income of $712 million, or $1.40 per diluted share. The decline in net income was largely due to the second quarter $587 million loss on extinguishment of debt incurred as a result of the debt refinancing and increases in 2012 for net realized capital losses due to hedging of the company’s runoff annuity blocks and for restructuring and other costs associated with the sales of the Retirement Plans, Individual Life and other businesses.
2012 core earnings totaled $1.4 billion, or $2.88 per diluted share, compared with $1.1 billion, or $2.24 per diluted share, in 2011. The increase in 2012 core earnings was principally due to a significant reduction in unfavorable prior year loss and loss adjustment expense reserve development (prior year development or PYD) in the company’s P&C operations compared with 2011.
2012
- 2012 catastrophe losses of $706 million, before tax ($459 million, after tax), which was approximately $210 million, after tax, or $0.43 per diluted share on a core basis, higher than the company’s 2012 catastrophe forecast;
- Favorable prior year development of $4 million, before tax ($3 million, after tax), or $0.01 per diluted share on a core basis; and
- A $17 million tax benefit in the fourth quarter, or $0.03 per diluted share on a core basis, associated with retiree prescription drug benefits.
Fourth Quarter 2012
- 2012 catastrophe losses totaled $335 million, before tax ($218 million, after tax), which was approximately $174 million, after tax, or $0.36 per diluted share on a core basis, higher than the company’s fourth quarter 2012 catastrophe forecast;
- Unfavorable prior year development of $9 million, before tax ($6 million, after tax), or $0.01 per diluted share on a core basis; and
- A $17 million tax benefit in the fourth quarter, or $0.03 per diluted share on a core basis, associated with retiree prescription drug benefits.
2013 OUTLOOK
The Hartford currently expects 2013 full year core earnings of between $1.375 billion and $1.475 billion, compared with $1.403 billion in 2012.
This outlook is a management estimate based on business, competitive, capital market, catastrophe loads and other assumptions. Key business and market assumptions included in this outlook are set forth in the table below. This outlook is subject to change for many reasons, including unusual or unpredictable items, such as catastrophe losses, tax benefits or charges, prior year development, investment results, and other items. The company has frequently experienced unusual or unpredictable benefits and charges that were not anticipated in previously provided guidance.
The complete earnings release is available here: Hartford Fourth Quarter 2012 Results & 2013 Outlook