Hartford Financial Services Group Q3 2010 Earnings Call Transcript

Hartford Financial Services Group (HIG)

Q3 2010 Earnings Call

November 03, 2010 10:00 am ET

Executives

David Levenson - President of Wealth Management and Chief Operating Officer of Hartford Life Insurance KK

Christopher Swift - Chief Financial Officer and Executive Vice President

Compare to:
Previous Statements by HIG
» Hartford Financial Services Group Q2 2010 Earnings Call Transcript
» Hartford Financial Services Group Q1 2010 Earnings Call Transcript
» The Hartford Financial Services Group Q4 2009 Earnings Call Transcript

Liam McGee - Chairman, Chief Executive Officer, President, Chairman of Executive Committee and Member of Finance/Investment/Risk Management Committee

Richard Costello - Senior Vice President of Investor Relations

Analysts

Thomas Gallagher - Crédit Suisse AG

Andrew Kligerman - UBS Investment Bank

Eric Berg - Barclays Capital

Darin Arita - Deutsche Bank AG

John Nadel - Sterne Agee & Leach Inc.

Larry Greenberg - Langen McAlenney

Nigel Dally - Morgan Stanley

Edward Spehar - BofA Merrill Lynch

Christopher Giovanni - Goldman Sachs Group Inc.

Presentation

Operator

Good morning. My name is Kamiko, and I'll be your conference operator today. At this time, I'd like to welcome everyone to The Hartford Third Quarter 2010 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to your host, Mr. Rick Costello. Sir, you may begin.

Richard Costello

Thank you, Kamiko. Good morning, and thank you for joining us for The Hartford's Third Quarter 2010 Financial Results Conference Call. The earnings release and financial supplement were issued yesterday. Our slide presentation for today's call is available on the company's website at www.thehartford.com. Chief Executive Officer, Liam McGee; and Chief Financial Officer, Chris Swift, will provide prepared remarks this morning and we will finish with Q&A. Also participating on today's call are Dave Levenson, President of Wealth Management; Andy Napoli, President of Consumer Markets; Andy Pincus, Acting Head of Commercial Markets; Greg Mcgreevey, Chief Investment Officer; and Alan Kreczko, General Counsel.

Turning to the presentation on Slide 2, please note that we will make certain statements during the call that should be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These include statements about The Hartford's future results of operations. We caution investors that these forward-looking statements are not guarantees of future performance and the actual results may differ materially. Investors should consider the important risks and uncertainties that may cause actual results to differ, including those discussed in our press release issued yesterday, our 2010 quarterly reports on Form 10-Q, our 2009 annual report on Form 10-K and other filings we make with the Securities and Exchange Commission. We assume no obligation to update this presentation, which speaks as of today's date. Today's discussion of The Hartford's financial performance includes financial measures that are not derived from Generally Accepted Accounting Principles or GAAP. Information regarding these non-GAAP and other financial measures, including reconciliations to the most directly comparable GAAP measures, is provided in the investor financial supplement for the third quarter of 2010 and in the press release we issued yesterday, as well as on the company's website, all of which can be found at www.thehartford.com. Now, I will hand the call over to The Hartford's Chairman, President and CEO, Liam McGee.

Liam McGee

Thank you, Rick. Good morning, everyone, and thank you for joining us today. Before we begin, I want to take a moment to remember JR Riley of The Hartford's Investor Relations team. As you probably heard, JR passed away unexpectedly a few weeks ago. I know many of you interacted with him on a regular basis. He was a valued and respected member of our team and a friend, and his untimely passing was truly tragic. We miss him. And his family remains in our thoughts and prayers.

In the third quarter, we delivered strong financial results based on solid execution, receiving a lift from rising equity markets and light catastrophe losses. I am confident that we are on the path to delivering more predictable and consistent performance, as well as achieving the targets we set out in April. Core earnings were up 8% from last year at $710 million or $1.43 per diluted share. Net income was $666 million or $1.34 per diluted share. The investment portfolio improved significantly in the quarter. Chris will provide details but by almost any metric, the portfolio was substantially stronger than it was a year ago. While some of the improvement is due to lower interest rates and spread tightening, it also reflects the significant actions that Greg McGreevey and his team have taken to appropriately derisk the portfolio.

Investment improvements helped drive book value per share to $45.80 on September 30, up 21% year-over-year and 11% sequentially. Our statutory surplus position increased about $700 million. During the quarter, we also put on additional equity and currency hedge protection to mitigate surplus volatility. We managed The Hartford surplus volatility with a combination of reinsurance and hedging programs and by holding appropriate amount of surplus capital. Over time, we will continue to reduce our exposure to changes in the capital markets in a prudent fashion, balancing economics and risk just as we've done in derisking the investment portfolio.

So in summary, the third quarter performance was very good and is a testament to The Hartford's strong focus on execution. We are making good progress implementing the strategy we outlined in April. We said then that this is a strategy of evolution, not revolution. And that consistent strong execution, quarter after quarter and year after year is key to our success. We've completed the reorganization into a customer-focused structure and this quarter, as you know, began reporting financial results reflecting this new segmentation. Leadership within the businesses is in place and the teams are moving ahead. Andy Pincus is running the Commercial Markets business, where we have good momentum. Andy is a talented and strong leader with deep knowledge of the insurance industry and has been an integral part of the P&C leadership team for the last five years. We are considering internal and external candidates for the Head of Commercial Markets and expect to name a permanent leader in early 2011.

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