The
Hartford today reported that it has filed an amended Form 10-Q with
the U.S. Securities and Exchange Commission (SEC) to restate its results
for the third quarter ended September 30, 2012. The amended filing
corrects for an error in the company’s preliminary calculation of the
gain or loss relating to the Individual Life business transaction under
U.S. generally accepted accounting principles (GAAP). The company is now
reporting a full year 2012 net loss of $38 million and shareholders’
equity of $22.4 billion at December 31, 2012, as compared with the
previously reported 2012 net income of $350 million and shareholders’
equity of $22.8 billion. The company’s 2012 core earnings of $1.4
billion are unchanged.
“We regret the error, but importantly the adjustments have no impact on
our reported 2012 core earnings, statutory results or surplus, and
announced capital management plan,” said The Hartford's Chairman,
President and Chief Executive Officer Liam E. McGee. “The Individual
Life, Retirement Plans and Woodbury Financial Services transactions were
attractive for The Hartford and completed on favorable financial terms.
They generated an aggregate statutory capital benefit of $2.2 billion
and this remains unchanged.”
In September 2012, The Hartford estimated that the Individual Life
transaction would not generate a material gain or loss under GAAP.
Following the identification of the error, the company estimates that
the transaction will result in a GAAP loss of $393 million, after tax.
This estimate is subject to change pending the final determination of
net assets sold, transaction costs and other adjustments. The error
resulted from the omission of the impact of certain reinsurance
recoverable balances on the gain/loss calculations for the transaction.
*Denotes financial measure not calculated based on generally accepted
accounting principles (“non-GAAP”)
The revised third quarter 2012 financial results include a $388 million
after-tax loss related to the transaction, which reflects the impairment
of goodwill and the establishment of a loss accrual for premium
deficiency. Net realized investment losses of $5 million, after tax,
related to the transaction were included in the company’s announced
fourth quarter 2012 financial results.
The company’s previously filed financial statements for the third
quarter of 2012 should no longer be relied upon. In addition, the
company has determined that there was a material weakness in its
internal control over financial reporting at September 30, 2012, which
was remediated as of December 31, 2012.
More detail related to the restatement is available in a Form 8-K that
The Hartford has filed today with the SEC. The company has furnished,
along with its 8-K filing, a revised and restated Investor Financial
Supplement for the quarter and full year ended December 31, 2012. In
addition to the amended Form 10-Q for the quarter ended September 30,
2012, the company also filed with the SEC its 2012 Annual Report on Form
10-K, as fully discussed in the 2012 Annual Report on Form 10-K.
ABOUT THE HARTFORD
With more than 200 years of expertise, The Hartford (NYSE:HIG) is a
leader in property and casualty insurance, group benefits and mutual
funds. The company is widely recognized for its excellence,
sustainability practices, trust and integrity. More information on the
company and its financial performance is available at www.thehartford.com.
DISCUSSION OF NON-GAAP FINANCIAL MEASURES
The Hartford uses non-GAAP financial measures in this press release to
assist investors in analyzing the company's operating performance for
the periods presented herein. Because The Hartford's calculation of
these measures may differ from similar measures used by other companies,
investors should be careful when comparing The Hartford's non-GAAP
financial measures to those of other companies. Definitions and
calculations of other financial measures used in this press release can
be found below and in The Hartford's revised and restated Investor
Financial Supplement for the fourth quarter of 2012, which is available
on The Hartford's website, http://ir.thehartford.com.
Core Earnings: The Hartford uses the
non-GAAP financial measure core earnings as an important measure of the
Company's operating performance. We believe that the measure core
earnings provides investors with a valuable measure of the performance
of the Company's ongoing businesses because it reveals trends in our
insurance and financial services businesses that may be obscured by
including the net effect of certain realized capital gains and losses,
discontinued operations, loss on extinguishment of debt, gains and
losses from disposal of businesses, certain restructuring charges and
the impact of Unlocks to deferred policy acquisition costs (“DAC”),
sales inducement assets ("SIA"), unearned revenue reserve ("URR") and
death and other insurance benefit reserve balances. Some realized
capital gains and losses are primarily driven by investment decisions
and external economic developments, the nature and timing of which are
unrelated to the insurance and underwriting aspects of our business.
Accordingly, core earnings excludes the effect of all realized gains and
losses (after tax and the effects of DAC) that tend to be highly
variable from period to period based on capital market conditions. The
Hartford believes, however, that some realized capital gains and losses
are integrally related to our insurance operations, so core earnings
includes net realized gains and losses such as net periodic settlements
on credit derivatives and net periodic settlements on the Japan fixed
annuity cross-currency swap. These net realized gains and losses are
directly related to an offsetting item included in the income statement
such as net investment income. Net income is the most directly
comparable GAAP measure. Core earnings should not be considered as a
substitute for net income and does not reflect the overall profitability
of the Company's business. Therefore, The Hartford believes that it is
useful for investors to evaluate both net income and core earnings when
reviewing the company's performance. A reconciliation of core earnings
to net income for the year ended December 31, 2012 can be found in The
Hartford's revised and restated Investor Financial Supplement for the
fourth quarter of 2012.
Some of the statements in this release may be considered forward-looking
statements as defined in the Private Securities Litigation Reform Act of
1995. We caution investors that these forward-looking statements are not
guarantees of future performance, and actual results may differ
materially. Investors should consider the important risks and
uncertainties that may cause actual results to differ. These important
risks and uncertainties include those discussed in our Quarterly Reports
on Form 10-Q and Form 10-Q/A, our 2012 Annual Report on Form 10-K and
the other filings we make with the Securities and Exchange Commission.
We assume no obligation to update this release, which speaks as of the
date issued.
HIG-F
