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The Hartford (NYSE:HIG) reported core earnings of $144 million for the three months ended June 30, 2014 (second quarter 2014), down 38% from $231 million in second quarter 2013. Core earnings declined as the increase in core earnings from Property & Casualty (P&C) Commercial, Group Benefits and Mutual Funds was more than offset by higher prior year loss and loss adjustment expense reserve development (PYD) for asbestos and environmental (A&E) compared with second quarter 2013. Second quarter 2014 core earnings per diluted share were $0.31, a 34% decrease from $0.47 in second quarter 2013 due to the decline in core earnings, which was slightly offset by the accretive impact of equity repurchases over the past 12 months.
Second quarter 2014 net loss totaled $467 million, or $1.00 per diluted share, compared with a second quarter 2013 net loss of $190 million, or $0.39 per diluted share. Second quarter 2014 net loss includes $617 million of loss on discontinued operations, after-tax, from the sale of the company's Japan annuity business. As a result of the sale, the financial results of this business have been reclassified as discontinued operations for all periods presented.
*Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP).
"This quarter marks a significant milestone in The Hartford's transformation," said The Hartford’s CEO Christopher J. Swift. “With the completion of the sale of the Japan annuity business, we have significantly reduced the size and risk of Talcott Resolution and expanded our 2014-2015 capital management plan, including a 20% increase in the quarterly common dividend. Going forward, we will continue to emphasize profitable growth in P&C, Group Benefits and Mutual Funds and improved operating effectiveness and efficiency."
"Although asbestos and environmental prior year development and elevated weather losses impacted The Hartford's second quarter results, the underlying business trends reflect the continued improvement in our operating fundamentals," said The Hartford's President Doug Elliot. "The P&C business delivered 3% written premium growth and both the P&C and Group Benefits businesses delivered continued underlying margin improvement, and we are pleased that Standard Commercial pricing remains strong and ahead of loss cost trends."
CONSOLIDATED FINANCIAL RESULTS
($ in millions except per share data)
Three Months Ended
Core earnings (loss):
P&C Other Operations
Property & Casualty (Combined)
Net income (loss)
Net income (loss) available to common shareholders per diluted share 1
Weighted average diluted common shares outstanding
Core earnings available to common shareholders per diluted share 1
Includes dilutive potential common sharesThe 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
Second quarter 2014 financial results included the following items that had an adverse $178 million, after-tax, or $0.38 per diluted share, impact on both net income and core earnings. This compares with unfavorable items in second quarter 2013 that decreased net income and core earnings by a total of $95 million, after-tax, or $0.19 per diluted share:
Catastrophe losses of $127 million, after-tax, in second quarter 2014 were $7 million, after-tax, or $0.01 per diluted share, higher than the company's $120 million, after-tax, outlook. Second quarter 2013 catastrophe losses of $121 million, after-tax, were in-line with the company's outlook;
Unfavorable PYD for A&E reserves of $164 million, after-tax, or $0.35 per diluted share, in second quarter 2014 compared with $91 million, after-tax, or $0.19 per diluted share, in second quarter 2013; and
Excluding A&E, P&C (Combined) unfavorable PYD of $7 million, after-tax, or $0.01 per diluted share, compared with second quarter 2013 unfavorable PYD of $4 million, after-tax, or $0.01 per diluted share, which included unfavorable PYD of $52 million, after-tax, due to the closing of the New York Fund for Reopened Cases (NY25A) in 2013.
Sale of Japan Annuity Business and Expansion of 2014-2015 Capital Management Plan
The Hartford also announced today a $1.275 billion increase in its existing $2.656 billion 2014-2015 capital management program to a total of $3.931 billion. In addition, the board of directors has declared a quarterly common dividend of $0.18 per share, a 20% increase, payable Oct. 1, 2014 to shareholders of record as of Sept. 2, 2014.