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The Hartford Reports First Quarter 2014 Core Earnings Of $564 Million, Or $1.18 Per Diluted Share, And Net Income Of $495 Million, Or $1.03 Per Diluted Share

The Hartford (NYSE:HIG) reported core earnings of $564 million for the three months ended March 31, 2014 (first quarter 2014), up 23% from $457 million in first quarter 2013, reflecting improved results in all of the company's business segments. Core earnings per diluted share rose 27% to $1.18 from $0.93 in first quarter 2013, reflecting the growth in core earnings and the accretive impact of share repurchases over the past 12 months.

First quarter 2014 net income totaled $495 million, or $1.03 per diluted share, compared with a first quarter 2013 net loss of $241 million, or $0.58 per diluted share. First quarter 2014 net income includes $70 million of net realized capital losses, after-tax and deferred acquisition costs (DAC), excluded from core earnings compared with a first quarter 2013 net capital gain of $19 million, after-tax and DAC, excluded from core earnings. First quarter 2013 net loss also included an unlock charge of $541 million, after-tax, and a $138 million after-tax charge for extinguishment of debt.

*Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP).

“The Hartford’s first quarter earnings were outstanding, reflecting the strong fundamentals of the P&C, Group Benefits and Mutual Funds businesses,” said The Hartford’s Chairman, President and CEO Liam E. McGee. “Despite the challenging winter weather, each business segment delivered core earnings growth over the prior year. Margins are improving and premiums are growing in P&C, while Group Benefits has achieved a substantial turnaround and Mutual Funds reported positive net flows.

“This morning’s announcement on our agreement to sell the Japan annuity company marks an important turning point for The Hartford. The transaction will materially reduce The Hartford’s risk profile at attractive economics, and positions us to create even greater value for shareholders. We are very pleased with The Hartford’s transformation, and remain focused on continuing to drive profitable growth in our businesses,” added McGee.

 

CONSOLIDATED FINANCIAL RESULTS

     
($ in millions except per share data) Three Months Ended
      Mar. 31 2014       Mar. 31 2013       Change 2
Core earnings (loss):            
P&C Commercial $264 $224 18%
Consumer Markets $101 $73 38%
P&C Other Operations       $21       $21       —%
Property & Casualty (Combined)       $386       $318       21%
Group Benefits       $45       $30       50%
Mutual Funds       $21       $20       5%
Sub-total       $452       $368       23%
Talcott Resolution       $175       $162       8%
Corporate       ($63)       ($73)       14%
Core earnings       $564       $457       23%
Net income (loss)       $495       ($241)       NM
Net income (loss) available to common shareholders per diluted share 1       $1.03       $(0.58)       NM
Weighted average diluted common shares outstanding       478.6       493.1       (3)%
Core earnings available to common shareholders per diluted share 1       $1.18       $0.93       27%

[1] Includes dilutive potential common shares [2] The Hartford defines increases or decreases greater than or equal to 200%, or changes from a net gain to a net loss position, or vice versa, as "NM" or not meaningful

First quarter 2014 financial results included the following items that had a favorable $58 million, after-tax, or $0.12 per diluted share, impact on both net income and core earnings compared with items that increased net income and core earnings by a total of $27 million, after-tax, or $0.05 per diluted share, in first quarter 2013:

  • Catastrophe losses in first quarter 2014 were approximately equal to the company's $57 million, after-tax, outlook but were higher than first quarter 2013 catastrophe losses of $21 million, after-tax, which were $36 million lower than the company's outlook;
  • Favorable P&C (Combined) prior year loss and loss adjustment expense reserve development (PYD) of $26 million, after-tax, or $0.05 per diluted share, compared with first quarter 2013 unfavorable PYD of $9 million, after-tax, or $0.02 per diluted share; and
  • A reduction in the estimated liability for New York State Workers’ Compensation Board assessments (NY Assessments) of $32 million, after-tax, or $0.07 per diluted share, due to a change in legislation effective Jan. 1, 2014.

PROPERTY & CASUALTY (COMBINED)First Quarter 2014 Highlights:

  • Written premiums grew 3% over first quarter 2013
  • Combined ratio, before catastrophes and PYD, of 87.9
  • Core earnings rose 21% to $386 million compared with $318 million in first quarter 2013
       
PROPERTY & CASUALTY (COMBINED)
($ in millions)     Three Months Ended
     

March 31, 2014

    March 31, 2013     Change
Written premiums     $2,597     $2,523     3%
Underwriting gain*     $253     $154     64%
PYD, before tax     $(40)     $14     NM
Current accident year catastrophe losses, before tax     $86     $32     169%
Expense ratio     26.0     28.2     2.2
Combined ratio     89.8     93.6     3.8
Combined ratio before catastrophes and PYD*     87.9     91.8     3.9
Investment income     $326     $312     4%
Core earnings     $386     $318     21%
Net income     $363 $351 3%

Note: Underwriting gain, expense ratio, combined ratio and combined ratio before catastrophes and PYD, core earnings and net income include a $49 million, before tax ($32 million, after-tax), benefit, or 2.0 points on the expense and combined ratios, related to NY Assessments in the three months ended March 31, 2014.

First quarter 2014 written premiums increased 3% over the prior year period, comprised of 1% growth in P&C Commercial and 6% growth in Consumer Markets.

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