Hartford, CT – The Hartford (NYSE:HIG) reported a net loss of $81 million in fourth quarter 2016 compared with net income of $421 million in fourth quarter 2015 and core earnings of $415 million in fourth quarter 2016, down from $445 million in fourth quarter 2015.
The net loss was primarily due to a fourth quarter 2016 charge of $423 million, after-tax, resulting from a reinsurance agreement with National Indemnity Company covering The Hartford’s A&E liability exposures. The net loss for fourth quarter 2016 also included an unlock charge of $12 million, after-tax, compared with an unlock benefit of $35 million, after-tax, in fourth quarter 2015. Both fourth quarter 2016 net loss and core earnings were affected by the $102 million, after-tax, decrease in property and casualty (P&C) underwriting results, partially offset by a $40 million, after-tax, increase in investment income from limited partnerships and other alternative investments (LPs). The decrease in P&C underwriting results compared with fourth quarter 2015 was primarily due to higher current accident year personal automobile liability losses and, for P&C in total, a $39 million, after-tax, net unfavorable change in prior accident year development (PYD) and an $18 million, after-tax, increase in catastrophe losses.
Fourth quarter 2016 net loss per diluted share was $0.22 compared with net income per diluted share of $1.01 in fourth quarter 2015. During 2016, the company repurchased 30.8 million common shares for a total of $1.3 billion, which was the primary contributor to an 8% decrease in the company’s weighted average diluted common shares outstanding. Core earnings per diluted share in fourth quarter 2016 were $1.08 compared with $1.07 in fourth quarter 2015, an increase of 1% as the impact of share repurchases more than offset the 7% decline in core earnings.
“The Hartford delivered strong performance this quarter, although losses from personal auto and the charge from our reinsurance agreement for asbestos and environmental exposures impacted our results,” said The Hartford’s Chairman and CEO Christopher Swift. “In light of market conditions, we are pleased with the strong margins in Commercial Lines and Group Benefits, reflecting disciplined execution, and also with the performance of Mutual Funds and Talcott Resolution. In Personal Lines our numerous initiatives are improving the quality and price adequacy of our new business and renewals, although financial results remained disappointing.”
The Hartford’s President Doug Elliot said, “Commercial Lines had an excellent quarter, with a stable underlying combined ratio of 88.2, solid growth in new business, and consistent retention and renewal written price increases. Group Benefits delivered very good results, with top line growth and an improved core earnings margin. However, Personal Lines had a net loss for the quarter as we strengthened auto bodily injury liability reserves for accident years 2015 and 2016 in response to severity trends that remain elevated. With the pricing and underwriting actions we have implemented in Personal Lines auto, we expect better results in 2017.”
Swift concluded, “I am proud of the successes we achieved in 2016 as we navigated through challenging market environments. Looking forward, we expect competition and loss cost trends to put modest pressure on our strong Commercial Lines and Group Benefits margins. In Personal Lines, we are working diligently to achieve better results in 2017. Across the company, we will remain a disciplined underwriter, balancing growth and profitability, as we continue investing in our businesses to generate long-term growth with greater efficiency.”
Book value per diluted share was $44.35 as of Dec. 31, 2016, up 3% compared with Dec. 31, 2015 as a result of a 7% decrease in common shares outstanding and dilutive potential common shares, partially offset by a 4% decrease in stockholders’ equity resulting from share repurchases and common stockholder dividends in excess of net income during 2016. Excluding AOCI, book value per diluted share as of Dec. 31, 2016 also increased 3% to $45.24 from $43.76 as of Dec. 31, 2015.
Net income return on equity (ROE) was 5.2% in fourth quarter 2016 compared with 9.3% in fourth quarter 2015, and core earnings ROE* was 7.6% in fourth quarter 2016 compared with 9.2% in fourth quarter 2015.
* Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP); definitions of non-GAAP measures and reconciliations to their closest GAAP measures can be found in this news release under the heading Discussion of Non-GAAP Financial Measures
The complete earnings release is available here: The Hartford Fourth Quarter 2016 Results
Source: The Hartford