The Hartford Reports Third Quarter 2012 Financial Results

The Hartford (NYSE:HIG) reported net income of $401 million, or $0.83 per diluted share, for the third quarter of 2012, compared with net income of $60 million, or $0.11 per diluted share, in the third quarter of 2011. The company also reported that third quarter 2012 core earnings rose to $378 million, or $0.78 per diluted share, from $50 million, or $0.08 per diluted share, in the third quarter of 2011.

“The Hartford generated strong third quarter financial results, reflecting continued P&C pricing momentum and low catastrophes," said Chairman, President and CEO Liam E. McGee. "Renewal pricing increased 8% in Standard Commercial, 4% in personal auto and 6% in homeowners, with higher retention in all three lines. Group Benefits long-term disability terminations improved, resulting in a slightly lower loss ratio. Fixed income deposits grew in Mutual Funds, resulting in significantly better net flows."

“The Hartford achieved several strategic objectives this quarter, including the successful completion of sales agreements, ahead of schedule, for Individual Life, Retirement Plans and Woodbury Financial Services,” added McGee. “These transactions, which are expected to generate an approximately $2.2 billion statutory capital benefit, are a significant step forward in The Hartford's progress towards sharpening our focus on our P&C, Group Benefits and Mutual Funds businesses."

*Denotes financial measures not calculated based on generally accepted accounting principles (“non-GAAP"). More information is provided in the Discussion of Non-GAAP Financial Measures section below.
 

THIRD QUARTER 2012 FINANCIAL RESULTS
 
(in millions except per share data)   Three Months Ended
 

September 30, 2012
 

September 30, 2011
  Change
Net income   $401   $60   NM 2

Net income available to common shareholders per diluted share
  $0.83   $0.11   NM
Core earnings   $378   $50   NM

Core earnings available to common shareholders per diluted share
  $0.78   $0.08   NM
Book value per diluted share   $48.13   $43.81   10%
Book value per diluted share (ex. AOCI) 1   $41.35   $41.44   —%

[1] Accumulated other comprehensive income (AOCI) [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.

Third quarter 2012 core earnings included the following items that, in total, increased core earnings by $7 million, after tax, or $0.01 per diluted share, and reduced net income by $49 million, or $0.10 per diluted share (all items are presented after tax):
  • Current accident year catastrophe losses totaled $7 million, which was $68 million below budget;
  • The deferred acquisition cost unlock charge (DAC unlock) included in core earnings was $23 million while the unfavorable DAC unlock charge included in net income was $79 million;
  • Net prior year P&C loss and loss adjustment expense reserve releases of $21 million;
  • Current accident year re-estimation of losses in P&C Commercial totaled $25 million; and
  • Restructuring and other costs related to the company’s exit from Individual Annuity new business, the sales of Individual Life, Retirement Plans and Woodbury Financial and other expense initiatives totaling $34 million.

COMMERCIAL MARKETS

Third Quarter 2012 Highlights:
  • Continued pricing and underwriting initiatives and significantly lower catastrophe losses generated P&C Commercial core earnings of $160 million compared with $87 million in the third quarter of 2011
  • Renewal written price increases compared with the prior year averaged 8% in Standard Commercial and 15% in Middle Market workers’ compensation
  • Group Benefits core earnings were $23 million, up 15% from $20 million in the third quarter of 2011
 

P&C COMMERCIAL

($ in millions)
  Three Months Ended
    September 30, 2012   September 30, 2011   Change
Written premiums   $1,552   $1,551   —%
Combined ratio 1   97.5%   99.4%   1.9
Core earnings   $160   $87   84%

[1] Excludes catastrophes and prior year development*
 

GROUP BENEFITS

($ in millions)
 

Three Months Ended
    September 30, 2012   September 30, 2011   Change
Fully insured premiums 2   $926   $1,000   (7%)
Loss ratio 2   79.3%   80.1%   0.8
Core earnings   $23   $20   15%

[2] Excludes buyout premiums
 

Commercial Markets net income rose 149% to $194 million in the third quarter of 2012 from $78 million in the third quarter of 2011 and core earnings increased 71% to $183 million from $107 million in the third quarter of 2011.

If you liked this article you might like

Buffett's Berkshire, Rivals Brace for Billions in Hurricane Harvey Claims

Cramer: Let's Handicap Hurricane Harvey's Best Stock Bets

Mid-afternoon Musings; Amazon Shorting: Doug Kass' Views

Truth Is, Intrinsic Value, not Price, Is Truth in Investing

Takeaways and Observations; Church of What Is Working Now: Doug Kass' Views