The Hartford Reports $241M Q1 Loss Mainly Due to One-Time Charges
Hartford Financial Services Group Inc. posted a net loss of $241 million for its 2013 first quarter, compared to net profit of $96 million reported during the first quarter of 2012.
The latest quarterly net loss was mainly due to one-time charges, however, and the company’s core earnings showed year-over-year growth. The one-time charges included a $541 million after-tax unlock charge mostly due to the expanded hedging of the international variable annuity block as well as a $138 million charge for early extinguishment of debts.
“The Hartford reported strong performance in the first quarter of 2013,” said The Hartford CEO Liam McGee, whose company is streamlining its businesses to focus on property/casualty insurance, group benefits and mutual funds operations, which combined delivered earnings growth of 19 percent across.
P/C standard commercial renewal written price increases averaged 9 percent and the company’s consolidated P/C combined ratio, ex-catastrophes and prior year development, improved by more than two points to 91.8.
Group benefits core earnings of $30 million were significantly improved from last year, he said, and gross sales for Mutual Funds were up 34 percent over first quarter 2012.
The Hartford said that during the latest quarter, the company incurred a $138 million after-tax charge for the early extinguishment of debt and a $69 million loss on disposition due to write-off of goodwill. Additionally, first quarter restructuring and other costs totaled $10 million after tax.
The company also said that during the first quarter, it executed a major portion of its capital management plan and effectively eliminated the currency and equity market risk of the Japan variable annuity block with an expanded hedging program.
Looking at property/casualty operations, written premiums for the first quarter came in at $2.52 billion, down 1 percent from $2.55 billion one year ago. The combined ratio improved two percentage points to 93.6 percent for the first quarter, compared to 95.6 percent one year ago. Catastrophe losses, before tax, was $32 million, down from $71 million recorded during the 2012 first quarter. Unfavorable prior year development totaled $14 million, before tax, in the first quarter, compared with favorable prior year development of $29 million, before tax, one year ago.
P/C operations’ underwriting gain for the first quarter improved to $154 million, up 43 percent compared to $108 million one year ago. Investment income fell slightly to $312 million, down 2 percent compared to $317 million a year ago. P/C operations’ core earnings rose 12 percent to $318 million. The overall net income from P/C operations came in at $351 million, up 8 percent from $324 million a year ago.
The Hartford said the improvement in the combined ratio and underwriting gain were principally due to improved P/C commercial underwriting margins as a result of the company’s pricing and underwriting initiatives that began in 2011.
In the P/C commercial segment, the first quarter underwriting gain rose to $91 million, compared to $4 million in the first quarter of 2012. The P/C commercial segment’s written premiums were $1.65 billion, down 2 percent compared to a year ago. The combined ratio was 94.0 percent, improving from 99.7 percent a year ago. Standard commercial renewal written price increases rose to 9 percent in the first quarter compared with 7 percent during the first quarter of 2012. Middle market workers’ comp and property achieved renewal written price increases in the low teens in the latest quarter.
In the P/C consumer markets segment, underwriting gain for the quarter was $72 million, down 39 percent from $118 million one year ago. Written premiums were $878 million, up 2 percent compared to a year ago. The combined ratio was 92.0 percent, compared to 87.0 percent a year ago.
In the P/C other operations segment, underwriting had a $9 million loss compared with a $14 million loss a year ago. The company said it will complete its annual ground-up reserve analysis of asbestos and environmental exposures in the second quarter of 2013.