The Hartford (NYSE:HIG) reported core earnings of $456 million, or $0.92
per diluted share, for the three months ended March 31, 2013 (first
quarter 2013), up 7% from $426 million, or $0.87 per diluted
share, for the three months ended March 31, 2012 (first quarter 2012).
Improved core earnings in the company's go forward Property and Casualty
(P&C), Group Benefits and Mutual Funds businesses and lower core losses
in Corporate were partially offset by reduced core earnings from Talcott
Resolution, the company's run-off life and annuity operation, due to the
January 2013 sales of the Retirement Plans and Individual Life
businesses and lower core earnings from annuities.
The company reported a first quarter 2013 net loss of $241 million, or
$0.58 per diluted share, compared with net income of $96 million, or
$0.18 per diluted share, in the first quarter of 2012. First quarter net
income included a $541 million, after tax, unlock charge principally due
to the expanded hedging of the international variable annuity block, and
a $138 million, after tax, loss on extinguishment of debt.
“The Hartford reported strong performance in the first quarter of 2013,”
said The Hartford's Chairman, President and CEO Liam E. McGee. “Our
go-forward businesses delivered core earnings growth of 19% across
Property and Casualty, Group Benefits and Mutual Funds. P&C Standard
Commercial renewal written price increases averaged 9% and our
consolidated P&C combined ratio, ex-catastrophes and prior year
development, improved by more than 2 points to 91.8. Group Benefits core
earnings of $30 million were significantly improved from last year and
gross sales for Mutual Funds were up 34% over first quarter 2012. We are
pleased with the progress we are making with these businesses, as well
as their outlook for profitable growth.”
*Denotes financial measures not calculated based on generally
accepted accounting principles (“non-GAAP").
“During the quarter, we executed a major portion of our capital
management plan and effectively eliminated the currency and equity
market risk of the Japan variable annuity block with an expanded hedging
program," said Executive Vice President and Chief Financial Officer
Christopher J. Swift. "Talcott Resolution is now capital
self-sufficient, the company's capital flexibility is significantly
enhanced, and our capital generation outlook is improved. As a result,
we are developing the next phase of our 2013 and 2014 capital management
plans.”
CONSOLIDATED FINANCIAL RESULTS
|
($ in millions except per share data)
|
|
|
Three Months Ended
|
|
|
|
March 31, 2013
|
|
|
March 31, 2012
|
|
|
Change3 |
Net income (loss)
|
|
|
($241)
|
|
|
$96
|
|
|
NM
|
Net income (loss) available to common shareholders per diluted share
|
|
|
$(0.58)
|
|
|
$0.18
|
|
|
NM
|
Core earnings (losses):
|
|
|
|
|
|
|
|
|
|
Property & Casualty
|
|
|
$318
|
|
|
$284
|
|
|
12%
|
Group Benefits
|
|
|
30
|
|
|
5
|
|
|
NM
|
Mutual Funds
|
|
|
20
|
|
|
20
|
|
|
—%
|
Talcott Resolution
|
|
|
161
|
|
|
219
|
|
|
(26)%
|
Corporate
|
|
|
(73)
|
|
|
(102)
|
|
|
(28)%
|
Core earnings
|
|
|
$456
|
|
|
$426
|
|
|
7%
|
Weighted average diluted common shares outstanding
|
|
|
493.1
|
|
|
489.9
|
|
|
1%
|
Core earnings available to common shareholders per diluted share1 |
|
|
$0.92
|
|
|
$0.87
|
|
|
6%
|
Book value per diluted share
|
|
|
$42.43
|
|
|
$43.25
|
|
|
(2)%
|
Book value per diluted share (ex. AOCI)2 |
|
|
$39.09
|
|
|
$40.55
|
|
|
(4)%
|
[1] Includes dilutive potential common shares and assumed conversion
of preferred shares
[2] Accumulated other comprehensive income
(AOCI)
[3] 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.
First quarter 2013 net income and core earnings included the following
items that increased both net income and core earnings by $27 million,
after tax, or $0.05 per diluted share:
-
First quarter 2013 catastrophe losses that were lower than the
company's forecast by approximately $36 million, after tax ($0.07 per
diluted share on a core earnings basis); first quarter 2013
catastrophe losses totaled $21 million, after tax; and
-
First quarter 2013 unfavorable prior year development (PYD) of $14
million, before tax ($9 million, after tax, or $0.02 per diluted share
on a core earnings basis).
First quarter 2012 included the following items that increased net
income by $57 million, after tax, and core earnings by $58 million,
after tax, or $0.12 per diluted share on a core earnings basis:
-
First quarter 2012 catastrophe losses that were lower than the
company's forecast by approximately $1 million, after tax; catastrophe
losses totaled $46 million, after tax;
-
Favorable PYD of $29 million, before tax ($19 million, after tax, or
$0.04 per diluted share on a core earnings basis); and
-
Net income of $37 million and core earnings of $38 million (or $0.08
per diluted share) from the Retirement Plans and Individual Life
businesses that were sold on January 1, and January 2, respectively,
of 2013.
PROPERTY & CASUALTY (CONSOLIDATED)
First Quarter 2013
Highlights:
-
First quarter 2013 core earnings rose 12% due to better underwriting
results compared with the first quarter of 2012
-
First quarter 2013 combined ratio improved to 93.6 from 95.6 in the
first quarter of 2012
-
First quarter 2013 combined ratio, before catastrophes and prior year
development (PYD), improved to 91.8 from 93.9 in the first quarter of
2012
PROPERTY & CASUALTY
|
($ in millions)
|
|
|
Three Months Ended
|
|
|
|
March 31, 2013
|
|
|
March 31, 2012
|
|
|
Change
|
Written premiums
|
|
|
$2,523
|
|
|
$2,549
|
|
|
(1)%
|
Underwriting gain
|
|
|
$154
|
|
|
$108
|
|
|
43%
|
Investment income
|
|
|
$312
|
|
|
$317
|
|
|
(2)%
|
Core earnings
|
|
|
$318
|
|
|
$284
|
|
|
12%
|
Net income
|
|
|
$351
|
|
|
$324
|
|
|
8%
|
Combined ratio
|
|
|
93.6
|
|
|
95.6
|
|
|
2.0
|
Combined ratio before catastrophes and PYD
|
|
|
91.8
|
|
|
93.9
|
|
|
2.1
|
PYD, before tax
|
|
|
$14
|
|
|
$(29)
|
|
|
NM
|
Catastrophe losses, before tax
|
|
|
$32
|
|
|
$71
|
|
|
(55)%
|
P&C (Consolidated) includes the consolidated financial results of the
company's three P&C segments: P&C Commercial, Consumer Markets and P&C
Other Operations.
First Quarter 2013 Results
First quarter 2013 P&C net income was $351 million and core earnings
were $318 million, up 8% and 12%, respectively, over the first quarter
of 2012. The increases reflect an improvement in the combined ratio and
underwriting gain from 95.6 and $108 million, respectively, in the first
quarter of 2012 to 93.6 and $154 million in the first quarter of 2013.
The improvement in the combined ratio and underwriting gain was
principally due to improved P&C Commercial underwriting margins as a
result of the company's pricing and underwriting initiatives that began
in 2011.
During the quarter, the company also had lower catastrophe losses that
were partially offset by unfavorable PYD compared to the first quarter
of 2012. Before catastrophes and PYD, the P&C (Consolidated) combined
ratio in the first quarter of 2013 was 91.8 compared with 93.9 in the
first quarter of 2012, reflecting improved underwriting margins in P&C
Commercial. Catastrophe losses totaled $32 million, before tax, in the
first quarter of 2013 compared with $71 million, before tax, in the
first quarter of 2012. Unfavorable PYD totaled $14 million, before tax,
in the first quarter of 2013 compared with favorable PYD of $29 million,
before tax, in the first quarter of 2012. Unfavorable PYD in the first
quarter of 2013 was comprised of $8 million from P&C Commercial, $4
million from Consumer Markets and $2 million from P&C Other.
First quarter 2013 written premiums declined 1% over the prior year
period, as lower premiums in P&C Commercial Markets were partially
offset by 2% written premium growth in Consumer Markets.
P&C Commercial
First Quarter 2013 Highlights:
-
First quarter 2013 underwriting gain of $91 million compared with $4
million in the first quarter of 2012 reflecting improved current
accident year results, including lower catastrophes, as well as lower
unfavorable PYD
-
Standard Commercial renewal written price increases rose to 9% in the
first quarter of 2013 compared with 7% in the prior year quarter
-
Middle Market workers’ compensation and property achieved renewal
written price increases in the low teens in the first quarter of 2013
P&C COMMERCIAL
|
($ in millions)
|
|
|
Three Months Ended
|
|
|
|
March 31, 2013
|
|
|
March 31, 2012
|
|
|
Change
|
Underwriting gain
|
|
|
$91
|
|
|
$4
|
|
|
NM
|
Combined ratio
|
|
|
94.0
|
|
|
99.7
|
|
|
5.7
|
Combined ratio before catastrophes and PYD
|
|
|
93.1
|
|
|
96.4
|
|
|
3.3
|
Written premiums
|
|
|
$1,645
|
|
|
$1,687
|
|
|
(2)%
|
P&C Commercial underwriting gain was $91 million in the first quarter of
2013 compared with an underwriting gain of $4 million in the first
quarter of 2012. The higher underwriting gain was primarily due to
improved current accident year profitability, including lower
catastrophes, as well as lower unfavorable PYD. First quarter 2013
catastrophe losses totaled $6 million, before tax, significantly lower
than catastrophe losses of $32 million, before tax, in the first quarter
of 2012. Unfavorable PYD declined to $8 million, before tax, in the
first quarter of 2013 compared with unfavorable PYD of $20 million,
before tax, in the first quarter of 2012.
The combined ratio, before catastrophes and PYD, improved to 93.1 in the
first quarter of 2013 compared with 96.4 in the first quarter of 2012,
reflecting improved underwriting margins in each of the company's
business lines (Small Commercial, Middle Market and Specialty) resulting
from the company's pricing and underwriting initiatives.
Written premiums declined 2% from $1,687 million in the first quarter of
2012 to $1,645 million in the first quarter of 2013. Excluding the
conversion of one large account from a retrospectively-rated program to
a high-deductible policy, written premiums decreased 1% over the same
period driven by the impact of pricing and underwriting actions
implemented to improve profitability. Pricing increases and new business
did not fully offset the impact of non-renewals.
P&C Commercial renewal written pricing continued to be strong, achieving
increases in all standard commercial business lines in the first quarter
of 2013. Standard Commercial, which is comprised of Small Commercial and
Middle Market, averaged renewal written pricing increases of 9%, a 2
point increase over the first quarter of 2012. Middle Market pricing
increased 11%, while Middle Market workers' compensation and property
pricing increased in the low teens.
New business premium for Small Commercial and Middle Market totaled $231
million, down 2% from $236 million in the first quarter of 2012. Policy
count retention in Small Commercial was 82% in the first quarter of 2013
compared with 84% in the first quarter of 2012. Middle Market policy
count retention for the first quarter of 2013 was 77%, a decrease from
79% in the first quarter of 2012.
Consumer Markets
First Quarter 2013 Highlights:
-
First quarter 2013 written premiums rose 2% compared with first
quarter 2012 due to strong new business and improved retention
-
First quarter 2013 auto and homeowners new business premium rose 5%
compared with the first quarter of 2012 due to growth in AARP Direct
and AARP Agency
-
First quarter 2013 combined ratio, excluding catastrophes and PYD,
improved to 88.6 compared with 88.8 in the prior year quarter
-
Auto and homeowners first quarter 2013 policy count retention each
improved 2 points compared with the first quarter of 2012
CONSUMER MARKETS
|
($ in millions)
|
|
|
Three Months Ended
|
|
|
|
March 31, 2013
|
|
|
March 31, 2012
|
|
|
Change
|
Underwriting gain
|
|
|
$72
|
|
|
$118
|
|
|
(39%)
|
Combined ratio
|
|
|
92.0
|
|
|
87.0
|
|
|
(5.0)
|
Combined ratio before catastrophes and PYD
|
|
|
88.6
|
|
|
88.8
|
|
|
0.2
|
Written premiums
|
|
|
$878
|
|
|
$861
|
|
|
2%
|
Consumer Markets reported an underwriting gain of $72 million in the
first quarter of 2013, down from $118 million in the first quarter of
2012 as lower catastrophe losses were more than offset by less favorable
prior year reserve development. First quarter 2013 underwriting results
included current year catastrophe losses of $26 million, before tax,
compared with $39 million, before tax, in the first quarter of 2012.
Unfavorable PYD was $4 million, before tax, in the first quarter of 2013
compared with favorable development of $55 million, before tax, in the
first quarter of 2012.
Consumer Markets combined ratio, before catastrophes and PYD, was 88.6
in the first quarter of 2013, down from 88.8 in the first quarter of
2012. The improvement of 0.2 points reflected a 0.4 point improvement in
the expense ratio driven by lower operating expenses and an improvement
in the auto loss ratio that was partially offset by an increase in the
homeowners loss ratio. The auto combined ratio, before catastrophes and
PYD, was down 0.5 points due to earned pricing increases and lower
underwriting expenses, partially offset by higher loss adjustment
expenses. The homeowners combined ratio, before catastrophes and PYD,
was 0.5 points higher than the first quarter of 2012 driven, in part, by
modestly higher severity for fire and non-catastrophe weather claims.
First quarter 2013 written premiums rose 2% from the first quarter of
2012 as a result of improved premium and policy count retention and a 5%
increase in new written premium due to strong production in AARP Direct
and AARP Agency. Auto new business premiums were up slightly while
homeowners increased 20%. First quarter 2013 policy count retention for
auto and homeowners each increased by 2 points to 86% and 87%,
respectively, from the first quarter of 2012. Premium retention for auto
and homeowners increased by 4 points and 3 points to 88% and 92%,
respectively.
P&C Other Operations
First Quarter 2013 Highlights:
First quarter 2013 underwriting loss was $9 million compared with $14
million in the first quarter of 2012. First quarter 2013 results
included unfavorable PYD of $2 million, before tax, while first quarter
of 2012 included unfavorable PYD of $6 million, before tax, primarily
resulting from an increase in environmental reserves. The company will
complete its annual ground-up reserve analysis of asbestos and
environmental exposures in the second quarter of 2013.
GROUP BENEFITS
First Quarter 2013 Highlights:
-
Fully insured premiums declined 15% in the first quarter of 2013 as a
result of continued pricing discipline and the previously-announced
non-renewal of the segment's largest account due to pricing and other
considerations
-
First quarter 2013 core earnings were $30 million, a significant
improvement from $5 million in the first quarter of 2012, driven by
improved group long-term disability results
-
After-tax margin on core earnings was 3.2% in the first quarter of
2013 compared with 0.5% in the first quarter of 2012
GROUP BENEFITS
|
($ in millions)
|
|
|
Three Months Ended
|
|
|
|
March 31, 2013
|
|
|
March 31, 2012
|
|
|
Change
|
Fully insured premiums¹
|
|
|
$812
|
|
|
$954
|
|
|
(15%)
|
Loss ratio
|
|
|
77.4%
|
|
|
83%
|
|
|
5.6
|
Core earnings
|
|
|
$30
|
|
|
$5
|
|
|
NM
|
[1] Fully insured ongoing premiums excludes buyout premiums and
premium equivalents
Group Benefits first quarter net income rose to $42 million compared
with $18 million in the first quarter of 2012 due to improved core
earnings. Core earnings in the first quarter of 2013 were $30 million
compared with $5 million in the first quarter of 2012, driven by
improved group long term disability results.
The loss ratio improved to 77.4% compared with 83% in the first quarter
of 2012, a 5.6 point improvement. The overall group disability loss
ratio improved by 8.3 points from the prior year period, reflecting
improvements in the long-term disability loss ratio driven by lower
severity and improved claim recoveries. Group long-term disability
claims incidence was stable year over year, but remains elevated when
compared to historical levels.
In the first quarter of 2013, fully insured premiums in Group Benefits
were $812 million, down 15% compared with $954 million in the first
quarter of 2012. The decline in premiums was a result of pricing
discipline for new business and its impact on renewal persistency, and
the non-renewal of the largest account in this segment due to pricing
and other considerations. The impact on core earnings and net income of
the non-renewal is expected to be nominal.
MUTUAL FUNDS
First Quarter 2013 Highlights:
-
First quarter 2013 gross sales improved 34% versus first quarter 2012
-
First quarter 2013 core earnings were $20 million, flat with the first
quarter of 2012 as higher revenue was offset by increased distribution
expenses
MUTUAL FUNDS
|
($ in millions)
|
|
|
Three Months Ended
|
|
|
|
March 31, 2013
|
|
|
March 31, 2012
|
|
|
Change
|
Core earnings
|
|
|
$20
|
|
|
$20
|
|
|
—%
|
Total Mutual Funds assets under management
|
|
|
$65,808
|
|
|
$63,260
|
|
|
4%
|
Annuity assets under management
|
|
|
$26,628
|
|
|
$29,145
|
|
|
(9%)
|
Total assets under management
|
|
|
$92,436
|
|
|
$92,405
|
|
|
—%
|
Average assets under management
|
|
|
$90,042
|
|
|
$88,972
|
|
|
1%
|
First quarter 2013 net income for Mutual Funds totaled $18 million, down
10% compared with $20 million in the first quarter of 2012 due to higher
distribution expenses combined with certain restructuring costs. Mutual
Funds first quarter 2013 core earnings were $20 million, flat compared
with the first quarter of 2012.
Mutual Funds assets under management increased 4% to $65.8 billion at
March 31, 2013 from $63.3 billion at March 31, 2012, reflecting market
appreciation of $6.3 billion, partially offset by $3.8 billion of
negative net flows.
TALCOTT RESOLUTION
First Quarter 2013 Highlights:
-
The Japan variable annuity (VA) hedging program was expanded in the
first quarter of 2013, effectively eliminating equity market and
currency risk
-
U.S. VA account values totaling approximately $570 million were
surrendered under the Enhanced Surrender Value Program (ESV), which
was launched in the first quarter; the ESV program cost reduced core
earnings by $25 million
-
Negative net flows in the U.S. and International VA blocks totaled
$3.3 billion and $1.0 billion, respectively, in the first quarter of
2013
TALCOTT RESOLUTION
|
($ in millions)
|
|
|
Three Months Ended
|
|
|
|
March 31, 2013
|
|
|
March 31, 2012
|
|
|
Change
|
Core earnings
|
|
|
$161
|
|
|
$219
|
|
|
(26%)
|
Net loss
|
|
|
$(294)
|
|
|
$(170)
|
|
|
73%
|
U.S. annuity account value
|
|
|
$76,297
|
|
|
$83,742
|
|
|
(9%)
|
International annuity account value
|
|
|
$32,241
|
|
|
$35,861
|
|
|
(10%)
|
U.S. VA annualized full surrender rate1 |
|
|
14.5%
|
|
|
9.6%
|
|
|
4.9
|
Japan VA annualized full surrender rate1 |
|
|
9.6%
|
|
|
2.8%
|
|
|
6.8
|
[1] Full surrender rate represents full contract liquidation;
excludes partial withdrawals
Talcott Resolution first quarter 2013 net loss was $294 million compared
with a net loss of $170 million in the first quarter of 2012. Talcott
Resolution net loss for the first quarter of 2013 included the following
items, which are not included in core earnings:
-
Unlock charge for market performance and assumption changes of $541
million, after tax, primarily due to expanded Japan VA hedging costs,
compared with a benefit of $214 million, after tax, in the first
quarter of 2012;
-
Restructuring and other costs of $1 million, after tax, compared with
$0 million in the first quarter of 2012;
-
Net reinsurance gain on dispositions of $44 million, after tax, due to
the sale of Individual Life and Retirement Plans businesses in January
2013; and
-
Net realized capital gain of $43 million, after tax and DAC, compared
with losses of $603 million in the first quarter of 2012, principally
as a result of the company's International VA hedging programs.
Talcott Resolution first quarter 2013 core earnings were $161 million, a
26% decrease compared with $219 million in the first quarter of 2012
principally due to the sale of the Individual Life and Retirement Plans
businesses in January 2013. Excluding earnings from these two
businesses, core earnings declined $20 million compared with the first
quarter of 2012 principally due to costs for the ESV program, which
totaled $25 million, after tax and DAC, as well as lower account values,
partially offset by favorable market performance.
U.S. VA account values declined by 9% to $65.5 billion at March 31, 2013
from $72.2 billion at March 31, 2012 due to negative net flows of $12.1
billion. International VA account values declined by 9% to $28.7 billion
at March 31, 2013 from $31.4 billion at March 31, 2012 due to negative
net flows of $2.7 billion.
U.S. VA annualized full surrender rate increased in the first quarter of
2013 by 4.9 percentage points to 14.5% compared to first quarter of 2012
primarily driven by the ESV program. Japan VA annualized full surrender
rate increased by 6.8 percentage points to 9.6% compared to first
quarter of 2012 due to improved market levels coupled with the aging of
the block in Japan.
CORPORATE
Net loss in Corporate totaled $358 million in the first quarter of 2013
compared with a net loss of $96 million in the first quarter of 2012.
During the quarter, the company incurred a $138 million charge, after
tax, for the early extinguishment of debt and a $69 million loss on
disposition, after tax, due to write-off of goodwill; there were no
corresponding charges in the first quarter of 2012. In addition, first
quarter 2013 restructuring and other costs totaled $10 million, after
tax, compared with $6 million, after tax, in the first quarter of 2012.
Core losses in Corporate were $73 million in the first quarter of 2013,
a 28% decrease from core losses of $102 million in the first quarter of
2012 due to higher investment income and lower interest expense.
Interest expense totaled $107 million, before tax, in the quarter, a
decrease of 14% from $124 million, before tax, in the first quarter of
2012 due to decrease in interest expense as a result of the debt
refinancing in the second quarter of 2012.
INVESTMENTS
First Quarter 2013 Highlights:
-
First quarter 2013 annualized investment yield of 4.3%, flat with the
first quarter of 2012
-
Excluding limited partnerships and other alternative investments,
first quarter 2013 annualized investment yield was 4.1% compared with
4.2% in the first quarter of 2012
-
First quarter 2013 net impairment losses including mortgage loan loss
reserves, which are not included in core earnings, were $21 million,
before tax, compared with $28 million, before tax, in the first
quarter of 2012
INVESTMENTS
|
($ in millions)
|
|
|
Three Months Ended
|
Amounts presented before tax
|
|
|
March 31, 2013
|
|
|
March 31, 2012
|
|
|
Change
|
Net investment income, excluding trading securities
|
|
|
$856
|
|
|
$1,070
|
|
|
(20%)
|
Net impairment losses including mortgage loan loss reserves
|
|
|
$(21)
|
|
|
$(28)
|
|
|
(25%)
|
Annualized investment yield1 |
|
|
4.3%
|
|
|
4.3%
|
|
|
—
|
Annualized investment yield, excluding limited partnerships and
other alternative investments
|
|
|
4.1%
|
|
|
4.2%
|
|
|
(0.1)
|
[1] Yields, before tax, calculated using annualized net investment
income (excluding income related to equity securities, trading) divided
by the monthly average invested assets at cost, amortized cost, or
adjusted carrying value, as applicable, excluding equity securities,
trading, repurchase agreement and dollar roll collateral, and
consolidated variable interest entity non-controlling interests. Yield
calculations for the three months ended March 31, 2013, exclude assets
transferred due to the sales of the Retirement Plans and Individual Life
businesses.
First quarter 2013 net investment income, excluding trading securities
associated with the company's runoff Japan VA block, was $856 million,
before tax, a 20% decrease compared with the first quarter of 2012. The
reduction in first quarter 2013 net investment income was principally
due to lower invested assets as a result of the sale of the Individual
Life and Retirement Plans businesses in January 2013. Excluding the
impact of the disposition of these businesses, net investment income
decreased approximately 1% in the first quarter of 2013 compared to the
first quarter of 2012.
Annualized investment yield, before tax, was 4.3% in the first quarter
of 2013, flat with the first quarter of 2012, including returns on
limited partnerships and other alternative investments that yielded an
annualized return, before tax, of approximately 9% in the first quarter
of 2013 compared with an annualized return, before tax, of approximately
8% in the first quarter of 2012. Excluding the impact of the sold
businesses, the current quarter annualized investment yield, before tax,
of 4.3% was higher than the first quarter 2012 annualized yield, before
tax, of 4.2% and included higher returns on limited partnerships and
other alternative investments.
Annualized investment yield, excluding limited partnerships and other
alternative investments, declined to 4.1%, before tax, in the first
quarter of 2013 compared to 4.2%, before tax, in the first quarter of
2012, primarily resulting from the impact of the assets transferred as
part of the sold businesses. Excluding the impact of the sold
businesses, the annualized investment yield, excluding limited
partnerships and other alternative investments, was consistent with the
first quarter of 2012 at 4.1%, before tax, as additional income from
repurchase agreements and dollar roll transactions, a modest increase in
allocation to higher yielding asset classes, and slight portfolio
duration extension offset the impact of investing in the sustained low
interest rate environment.
Net impairment losses for the first quarter of 2013, including mortgage
loan loss reserves, totaled $21 million, before tax, compared with net
losses of $28 million, before tax, in the first quarter of 2012.
Total invested assets, excluding trading securities, were $86.7 billion
as of March 31, 2013 compared with $105.3 billion at Dec. 31, 2012, a
18% reduction due principally to the sale of the Retirement Plans and
Individual Life businesses in early January 2013. Excluding the impact
of the disposition of these businesses, invested assets, excluding
trading securities, declined $1.3 billion at March 31, 2013 compared
with Dec. 31, 2012.
STOCKHOLDERS’ EQUITY
The Hartford’s stockholders’ equity was $20.9 billion as of March 31,
2013, a $1.5 billion, or 7%, decrease over stockholders’ equity of $22.4
billion as of Dec. 31, 2012, reflecting first quarter 2013 net loss of
$241 million, share and warrant repurchases totaling $48 million, common
and preferred dividends of $55 million as well as an decrease in AOCI
from $2.8 billion at Dec. 31, 2012 to $1.6 billion as of March 31, 2013.
Book value per diluted common share, which includes the dilutive effect
of the company’s common stock warrants and mandatory convertible
preferred stock, was $42.43 as of March 31, 2013, a decrease of 7%
compared with $45.80 as of Dec. 31, 2012. Excluding AOCI, book value per
diluted common share* declined 2% to $39.09 as of March 31, 2013,
compared with $40.00 as of Dec. 31, 2012.
On April 1, 2013, the company's $575 million of Mandatory Convertible
Preferred Stock was converted into 21.2 million shares of common equity.
These shares were included in diluted share calculations for the first
quarter of 2013 and therefore there is no impact on book value per
diluted share as a result of this conversion.
CONFERENCE CALL
The Hartford will discuss its first quarter 2013 financial results in a
conference call on Tuesday, April 30, 2013 at 9 a.m. EDT. The call,
along with a slide presentation, can be accessed live or as a replay
through the investor relations section of The Hartford's website at http://ir.thehartford.com.
The slide presentation will be posted on The Hartford’s website at
approximately 8:30 a.m. EDT on April 30, 2013.
More detailed financial information can be found in The Hartford's
Investor Financial Supplement for March 31, 2013 and 10-Q filing for the
quarter ended March 31, 2013, which are both available at http://ir.thehartford.com.
ABOUT THE HARTFORD
With more than 200 years of expertise, The Hartford (NYSE:HIG) is a
leader in property and casualty insurance, group benefits and mutual
funds. The company is widely recognized for its service excellence,
sustainability practices, trust and integrity. More information on the
company and its financial performance is available at www.thehartford.com.
HIG-F
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
|
CONSOLIDATING INCOME STATEMENTS
|
($ in millions)
|
Three Months Ended March 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property & Casualty
|
|
|
Group Benefits
|
|
|
Mutual Funds
|
|
|
Talcott Resolution
|
|
|
Corporate
|
|
|
Consolidated
|
Earned premiums
|
|
|
$2,425
|
|
|
$812
|
|
|
$—
|
|
|
$15
|
|
|
$—
|
|
|
$3,252
|
Fee income
|
|
|
—
|
|
|
14
|
|
|
164
|
|
|
526
|
|
|
3
|
|
|
707
|
Net investment income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available-for-sale and other
|
|
|
312
|
|
|
97
|
|
|
—
|
|
|
434
|
|
|
13
|
|
|
856
|
Equity securities held for trading [1]
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,700
|
|
|
—
|
|
|
2,700
|
Total net investment income
|
|
|
312
|
|
|
97
|
|
|
—
|
|
|
3,134
|
|
|
13
|
|
|
3,556
|
Other revenues
|
|
|
68
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
68
|
Net realized capital gains (losses)
|
|
|
51
|
|
|
18
|
|
|
—
|
|
|
1,622
|
|
|
(96)
|
|
|
1,595
|
Total revenues
|
|
|
2,856
|
|
|
941
|
|
|
164
|
|
|
5,297
|
|
|
(80)
|
|
|
9,178
|
Benefits, losses, and loss adjustment expenses
|
|
|
1,582
|
|
|
639
|
|
|
—
|
|
|
444
|
|
|
—
|
|
|
2,665
|
Benefits, losses, and loss adjustment expenses – returns credited on
International variable annuities [1]
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,700
|
|
|
—
|
|
|
2,700
|
Amortization of deferred policy acquisition costs
|
|
|
310
|
|
|
8
|
|
|
9
|
|
|
1,009
|
|
|
—
|
|
|
1,336
|
Insurance operating costs and other expenses
|
|
|
471
|
|
|
240
|
|
|
126
|
|
|
151
|
|
|
26
|
|
|
1,014
|
Loss on extinguishment of debt
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
213
|
|
|
213
|
Reinsurance loss on dispositions
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,505
|
|
|
69
|
|
|
1,574
|
Interest expense
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
107
|
|
|
107
|
Restructuring and other costs
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
16
|
|
|
18
|
Total benefits and expenses
|
|
|
2,363
|
|
|
887
|
|
|
136
|
|
|
5,810
|
|
|
431
|
|
|
9,627
|
Income (loss) from continuing operations before income taxes
|
|
|
493
|
|
|
54
|
|
|
28
|
|
|
(513)
|
|
|
(511)
|
|
|
(449)
|
Income tax expense (benefit)
|
|
|
142
|
|
|
12
|
|
|
10
|
|
|
(219)
|
|
|
(153)
|
|
|
(208)
|
Income (loss) from continuing operations
|
|
|
351
|
|
|
42
|
|
|
18
|
|
|
(294)
|
|
|
(358)
|
|
|
(241)
|
Add: Loss from discontinued operations, after tax
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
Net income (loss)
|
|
|
351
|
|
|
42
|
|
|
18
|
|
|
(294)
|
|
|
(358)
|
|
|
(241)
|
Less: DAC unlock impact on net income (loss), after tax
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(541)
|
|
|
—
|
|
|
(541)
|
Less: Restructuring and other costs, after tax
|
|
|
—
|
|
|
—
|
|
|
(1)
|
|
|
(1)
|
|
|
(10)
|
|
|
(12)
|
Less: Income (loss) from discontinued operations, after tax
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
Less: Loss on extinguishment of debt, after tax
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(138)
|
|
|
(138)
|
Less: Net gain (loss) on dispositions, after tax
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
44
|
|
|
(69)
|
|
|
(25)
|
Less: Net realized gains (losses), after tax and DAC, excluded from
core earnings
|
|
|
33
|
|
|
12
|
|
|
(1)
|
|
|
43
|
|
|
(68)
|
|
|
19
|
Core earnings (losses)
|
|
|
$318
|
|
|
$30
|
|
|
$20
|
|
|
$161
|
|
|
$(73)
|
|
|
$456
|
[1] Includes dividend income and mark-to-market effects of trading
securities supporting the international variable annuity business, which
are classified in net investment income with corresponding
amounts credited to policyholders within benefits, losses and loss
adjustment expenses.
|
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
|
CONSOLIDATING INCOME STATEMENTS
|
($ in millions)
|
Three Months Ended March 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property & Casualty
|
|
|
Group Benefits
|
|
|
Mutual Funds
|
|
|
Talcott Resolution
|
|
|
Corporate
|
|
|
Consolidated
|
Earned premiums
|
|
|
$2,466
|
|
|
$957
|
|
|
$—
|
|
|
$19
|
|
|
$—
|
|
|
$3,442
|
Fee income
|
|
|
—
|
|
|
15
|
|
|
151
|
|
|
916
|
|
|
52
|
|
|
1,134
|
Net investment income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available-for-sale and other
|
|
|
317
|
|
|
99
|
|
|
(1)
|
|
|
661
|
|
|
(6)
|
|
|
1,070
|
Equity securities held for trading [1]
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,866
|
|
|
—
|
|
|
2,866
|
Total net investment income (loss)
|
|
|
317
|
|
|
99
|
|
|
(1)
|
|
|
3,527
|
|
|
(6)
|
|
|
3,936
|
Other revenues
|
|
|
59
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
59
|
Net realized capital gains (losses)
|
|
|
61
|
|
|
20
|
|
|
1
|
|
|
(1,007)
|
|
|
15
|
|
|
(910)
|
Total revenues
|
|
|
2,903
|
|
|
1,091
|
|
|
151
|
|
|
3,455
|
|
|
61
|
|
|
7,661
|
Benefits, losses, and loss adjustment expenses
|
|
|
1,643
|
|
|
807
|
|
|
—
|
|
|
588
|
|
|
—
|
|
|
3,038
|
Benefits, losses, and loss adjustment expenses – returns credited
on International variable annuities [1]
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,864
|
|
|
—
|
|
|
2,864
|
Amortization of deferred policy acquisition costs
|
|
|
314
|
|
|
8
|
|
|
9
|
|
|
(10)
|
|
|
—
|
|
|
321
|
Insurance operating costs and other expenses
|
|
|
495
|
|
|
258
|
|
|
111
|
|
|
363
|
|
|
76
|
|
|
1,303
|
Interest expense
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
124
|
|
|
124
|
Restructuring and other costs
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9
|
|
|
9
|
Total benefits and expenses
|
|
|
2,452
|
|
|
1,073
|
|
|
120
|
|
|
3,805
|
|
|
209
|
|
|
7,659
|
Income (loss) from continuing operations before income taxes
|
|
|
451
|
|
|
18
|
|
|
31
|
|
|
(350)
|
|
|
(148)
|
|
|
2
|
Income tax expense (benefit)
|
|
|
126
|
|
|
—
|
|
|
11
|
|
|
(180)
|
|
|
(52)
|
|
|
(95)
|
Income (loss) from continuing operations
|
|
|
325
|
|
|
18
|
|
|
20
|
|
|
(170)
|
|
|
(96)
|
|
|
97
|
Add: Income (loss) from discontinued operations, after tax
|
|
|
(1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1)
|
Net income (loss)
|
|
|
324
|
|
|
18
|
|
|
20
|
|
|
(170)
|
|
|
(96)
|
|
|
96
|
Less: Unlock benefit (charge), after tax
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
214
|
|
|
—
|
|
|
214
|
Less: Restructuring and other costs, after tax
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6)
|
|
|
(6)
|
Less: Loss from discontinued operations, after tax
|
|
|
(1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1)
|
Less: Net realized gains (losses), after tax and DAC, excluded from
core earnings
|
|
|
41
|
|
|
13
|
|
|
—
|
|
|
(603)
|
|
|
12
|
|
|
(537)
|
Core earnings (losses)
|
|
|
$284
|
|
|
$5
|
|
|
$20
|
|
|
$219
|
|
|
$(102)
|
|
|
$426
|
[1] Includes dividend income and mark-to-market effects of trading
securities supporting the international variable annuity business, which
are classified in net investment income with corresponding
amounts credited to policyholders within benefits losses and loss
adjustment expenses.
|
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
|
RESULTS BY SEGMENT
|
($ in millions, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31, 2013
|
|
March 31, 2012
|
|
|
Change
|
Property & Casualty Commercial
|
|
|
$
|
224
|
|
|
$
|
162
|
|
|
|
38
|
%
|
Consumer Markets
|
|
|
73
|
|
|
102
|
|
|
|
(28
|
)%
|
P&C Other Operations
|
|
|
21
|
|
|
20
|
|
|
|
5
|
%
|
Total P&C core earnings (losses)
|
|
|
318
|
|
|
284
|
|
|
|
12
|
%
|
Group Benefits core earnings
|
|
|
30
|
|
|
5
|
|
|
|
NM
|
|
Mutual Funds core earnings
|
|
|
20
|
|
|
20
|
|
|
|
—
|
%
|
Talcott Resolution core earnings
|
|
|
161
|
|
|
219
|
|
|
|
(26
|
)%
|
Corporate core losses
|
|
|
(73
|
)
|
|
(102
|
)
|
|
|
(28
|
)%
|
CONSOLIDATED CORE EARNINGS
|
|
|
456
|
|
|
426
|
|
|
|
7
|
%
|
Add: Unlock benefit (charge), after tax
|
|
|
(541
|
)
|
|
214
|
|
|
|
NM
|
|
Add: Restructuring and other costs, after tax
|
|
|
(12
|
)
|
|
(6
|
)
|
|
|
100
|
%
|
Add: Loss from discontinued operations after tax
|
|
|
—
|
|
|
(1
|
)
|
|
|
(100
|
)%
|
Add: Loss on extinguishment of debt, after tax
|
|
|
(138
|
)
|
|
—
|
|
|
|
100
|
%
|
Add: Loss on dispositions after tax
|
|
|
(25
|
)
|
|
—
|
|
|
|
100
|
%
|
Add: Net realized capital gains (losses), after tax and DAC,
excluded from core earnings [1]
|
|
|
19
|
|
|
(537
|
)
|
|
|
NM
|
|
Net income (loss)
|
|
|
$
|
(241
|
)
|
|
$
|
96
|
|
|
|
NM
|
|
PER SHARE DATA
|
|
|
|
|
|
|
|
|
Diluted earnings (losses) per common share
|
|
|
|
|
|
|
|
|
Core earnings available to common shareholders and assumed
conversion of preferred shares
|
|
|
$
|
0.92
|
|
|
$
|
0.87
|
|
|
|
6
|
%
|
Less: Difference arising from shares used for the denominator
between net loss and core earnings
|
|
|
0.04
|
|
|
—
|
|
|
|
100
|
%
|
Add: Unlock benefit (charge), after tax
|
|
|
(1.15
|
)
|
|
0.46
|
|
|
|
NM
|
|
Add: Restructuring and other costs, after tax
|
|
|
(0.03
|
)
|
|
(0.01
|
)
|
|
|
NM
|
|
Add: Income (loss) from discontinued operations
|
|
|
—
|
|
|
(0.01
|
)
|
|
|
100
|
%
|
Add: Loss on extinguishment of debt, after tax
|
|
|
(0.29
|
)
|
|
—
|
|
|
|
100
|
%
|
Add: Net realized capital gains (losses), after tax and DAC,
excluded from core earnings [1]
|
|
|
(0.02
|
)
|
|
(1.15
|
)
|
|
|
(98
|
)%
|
Less: Assumed conversion of preferred dividends
|
|
|
(0.03
|
)
|
|
(0.02
|
)
|
|
|
50
|
%
|
Net income (loss) available to common shareholders
|
|
|
$
|
(0.58
|
)
|
|
$
|
0.18
|
|
|
|
NM
|
|
Talcott Resolution Unlock benefit (charge), after tax
|
|
|
$
|
(541
|
)
|
|
$
|
214
|
|
|
|
NM
|
|
[1] NM: 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.”
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 Investor Financial Supplement for the first quarter of
2013, which is available on The Hartford's website, http://ir.thehartford.com.
Book value per diluted common share excluding
accumulated other comprehensive income ("AOCI”): Book value
per diluted common share excluding AOCI is a non-GAAP financial measure
based on a GAAP financial measure. It is calculated by dividing (a)
common stockholders' equity excluding AOCI, after tax, by (b) common
shares outstanding and dilutive potential common shares. The Hartford
provides book value per diluted common share excluding AOCI to enable
investors to analyze the company’s stockholders’ equity excluding the
effect of changes in the value of the company’s investment portfolio and
other assets due to interest rates, currency and other factors. The
Hartford believes book value per diluted common share excluding AOCI is
useful to investors because it eliminates the effect of items that can
fluctuate significantly from period to period, primarily based on
changes in market value. Book value per diluted common share is the most
directly comparable GAAP measure. A reconciliation of book value per
diluted common share, including AOCI to book value per diluted common
share, excluding AOCI as of March 31, 2013 and December 31, 2012, is set
forth below.
|
|
|
As of
|
|
|
|
March 31, 2013
|
|
|
Dec. 31, 2012
|
|
|
Change
|
Book value per diluted common share, including AOCI
|
|
|
$42.43
|
|
|
$45.80
|
|
|
(7)%
|
Less: Per diluted share impact of AOCI
|
|
|
3.34
|
|
|
5.80
|
|
|
(42)%
|
Book value per diluted common share, excluding AOCI
|
|
|
$39.09
|
|
|
$40.00
|
|
|
(2)%
|
Combined ratio before catastrophes and prior year
development: Combined ratio before catastrophes and prior year
development is a non-GAAP financial measure. Combined ratio is the most
directly comparable GAAP measure. The combined ratio is the sum of the
loss and loss adjustment expense ratio, the expense ratio and the
policyholder dividend ratio. This ratio measures the cost of losses and
expenses for every $100 of earned premiums. A combined ratio below 100%
demonstrates a positive underwriting result. A combined ratio above 100%
indicates a negative underwriting result. The combined ratio before
catastrophes and prior year development represents the combined ratio
for the current accident year, excluding the impact of catastrophes and
prior year development. The company believes this ratio is an important
measure of the trend in profitability since it removes the impact of
volatile and unpredictable catastrophe losses and prior accident year
loss and loss adjustment expense reserve. A reconciliation of the
combined ratio to the combined ratio before catastrophes and prior year
development is provided in the table below.
|
|
|
Three Months Ended
|
|
|
|
March 31, 2013
|
|
|
March 31, 2012
|
P&C Commercial
|
|
|
|
|
|
|
Combined ratio
|
|
|
94.0
|
|
|
99.7
|
|
Catastrophe ratio
|
|
|
0.4
|
|
|
2.2
|
|
Non-catastrophe prior year development
|
|
|
0.5
|
|
|
1.1
|
|
Combined ratio before PYD & catastrophes
|
|
|
93.1
|
|
|
96.4
|
|
|
|
|
|
|
|
|
Consumer Markets
|
|
|
|
|
|
|
Combined ratio
|
|
|
92.0
|
|
|
87.0
|
|
Catastrophe ratio
|
|
|
3.1
|
|
|
2.8
|
|
Non-catastrophe prior year development
|
|
|
0.2
|
|
|
(4.5
|
)
|
Combined ratio before PYD & catastrophes
|
|
|
88.6
|
|
|
88.8
|
|
|
|
|
|
|
|
|
|
Core Earnings: The Hartford uses the
non-GAAP measure core earnings as an important measure of the company’s
operating performance. The Hartford believes 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 on business disposition transactions, certain restructuring
charges and the impact of Unlocks to deferred policy acquisition costs
("DAC"), sales inducement assets ("SIA"), unearned revenue reserves
("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 (net of 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 (loss) is the most directly
comparable U.S. GAAP measure. Core earnings should not be considered as
a substitute for net income (loss) 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
(loss) and core earnings when reviewing the company’s performance.
A reconciliation of core earnings to net income (loss) for the quarterly
periods ended March 31, 2013 and 2012, is included in this press
release. A reconciliation of core earnings to net income (loss) for
individual reporting segments can be found in The Hartford's Investor
Financial Supplement for the first quarter of 2013.
Core earnings available to common shareholders per
diluted share: Core earnings available to common shareholders per
diluted share is calculated based on the non-GAAP financial measure core
earnings. It is calculated by dividing (a) core earnings, by (b) diluted
common shares outstanding. The Hartford believes that the measure core
earnings available to common shareholders per diluted share provides
investors with a valuable measure of the company's operating performance
for the same reasons applicable to its underlying measure, core
earnings. Net income (loss) per diluted common share is the most
directly comparable GAAP measure. Core earnings available to common
shareholders per diluted share should not be considered as a substitute
for net income (loss) per diluted share 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 (loss)per diluted share and core earnings
available to common shareholders per diluted share when reviewing the
company's performance. A reconciliation of core earnings available to
common shareholders per diluted share to net income (loss) per diluted
common share for the quarterly periods ended March 31, 2013 and 2012 is
included in this press release under the heading “The Hartford Financial
Services Group, Inc. Results By Segment.”
Underwriting gain (loss): The Hartford's
management evaluates profitability of the P&C Commercial and Consumer
Markets segments primarily on the basis of underwriting gain or loss.
Underwriting gain (loss) is a before-tax measure that represents earned
premiums less incurred losses, loss adjustment expenses and underwriting
expenses. Net income (loss) is the most directly comparable GAAP
measure. Underwriting gain (loss) is influenced significantly by earned
premium growth and the adequacy of The Hartford's pricing. Underwriting
profitability over time is also greatly influenced by The Hartford's
underwriting discipline, as management strives to manage exposure to
loss through favorable risk selection and diversification, effective
management of claims, use of reinsurance and its ability to manage its
expenses. The Hartford believes that the measure underwriting gain
(loss) provides investors with a valuable measure of profitability,
before tax, derived from underwriting activities, which are managed
separately from the company's investing activities. A reconciliation of
underwriting results to net income for the quarterly periods ended March
31, 2013 and 2012, is set forth below.
|
|
|
Three Months Ended
|
|
|
|
March 31, 2013
|
|
|
March 31, 2012
|
P&C Commercial
|
|
|
|
|
|
|
Net income
|
|
|
$253
|
|
|
$189
|
Less: Loss from discontinued operations, after tax
|
|
|
—
|
|
|
(1)
|
Less: Net realized capital gains
|
|
|
43
|
|
|
43
|
Add: Income tax expense
|
|
|
99
|
|
|
66
|
Less: Net servicing income
|
|
|
6
|
|
|
4
|
Less: Other expenses
|
|
|
(28)
|
|
|
(30)
|
Less: Net investment income
|
|
|
240
|
|
|
235
|
Underwriting gain
|
|
|
$91
|
|
|
$4
|
|
|
|
|
|
|
|
Consumer Markets
|
|
|
|
|
|
|
Net income
|
|
|
$77
|
|
|
$108
|
Less: Net realized capital gains
|
|
|
7
|
|
|
7
|
Add: Income tax expense
|
|
|
36
|
|
|
51
|
Less: Net servicing income
|
|
|
9
|
|
|
6
|
Less: Other expenses
|
|
|
(12)
|
|
|
(15)
|
Less: Net investment income
|
|
|
37
|
|
|
43
|
Underwriting gain
|
|
|
$72
|
|
|
$118
|
|
|
|
|
|
|
|
SAFE HARBOR STATEMENT
Some of the statements in this release should be considered
forward-looking statements as defined in the Private Securities
Litigation Reform Act of 1995. Forward-looking statements can be
identified by words such as “anticipates,” “intends,” “plans,” “seeks,”
“believes,” “estimates,” “expects,” “projects” and similar references to
the future. Examples of forward-looking statements include, but are not
limited to, statements the company makes regarding future results of
operations. The Hartford cautions 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: challenges related to the company's
current operating environment, including continuing uncertainty about
the strength and speed of the recovery in the United States and other
key economies and the impact of governmental stimulus and austerity
initiatives, sovereign credit concerns, a sustained low interest rate
environment, higher tax rates and other potentially adverse developments
on financial, commodity and credit markets and consumer spending and
investment and the effect of these events on our returns in investment
portfolios and our hedging costs associated with our variable annuities
business; the risks, challenges and uncertainties associated with our
strategic realignment to focus on our property and casualty, group
benefits and mutual fund businesses, place our Individual Annuity
business into run-off and sell the Individual Life, Woodbury Financial
Services and the Retirement Plans businesses, including potential
constraints on our ability to deploy capital as and when planned;
execution risk related to the continued repositioning of our investment
portfolios and refinement of our hedge program for our run-off annuity
block; the future capital self-sufficiency of the company's Talcott
Resolution businesses; market risks associated with our business,
including changes in interest rates, credit spreads, equity prices,
market volatility and foreign exchange rates, and implied volatility
levels, as well as continuing uncertainty in key sectors such as the
global real estate market; the possibility of unfavorable loss
development including with respect to long-tailed exposures; the
possibility of a pandemic, earthquake, or other natural or man-made
disaster that may adversely affect our businesses; weather and other
natural physical events, including the severity and frequency of storms,
hail, winter storms, hurricanes and tropical storms, as well as climate
change and its potential impact on weather patterns; risk associated
with the use analytical models in making decisions in key areas such as
underwriting, capital, hedging, reserving, and catastrophe risk
management; the uncertain effects of emerging claim and coverage issues;
the company's ability to effectively price its property and casualty
policies, including its ability to obtain regulatory consents to pricing
actions or to non-renewal or withdrawal of certain product lines; the
impact on our statutory capital of various factors, including many that
are outside the company's control, which can in turn affect our credit
and financial strength ratings, cost of capital, regulatory compliance
and other aspects of our business and results; risks to our business,
financial position, prospects and results associated with negative
rating actions or downgrades in the company's financial strength and
credit ratings or negative rating actions or downgrades relating to our
investments; the impact on our investment portfolio if our investment
portfolio is concentrated in any particular segment of the economy;
volatility in our earnings and potential material changes to our results
resulting from our adjustment of our risk management program to
emphasize protection of economic value; the potential for differing
interpretations of the methodologies, estimations and assumptions that
underlie the valuation of the company's financial instruments that could
result in changes to investment valuations; the subjective
determinations that underlie the company's evaluation of
other-than-temporary impairments on available-for-sale securities;
losses due to nonperformance or defaults by others; the potential for
further acceleration of deferred policy acquisition cost amortization;
the potential for further impairments of our goodwill or the potential
for changes in valuation allowances against deferred tax assets; the
possible occurrence of terrorist attacks and the company's ability to
contain its exposure, including the effect of the absence or
insufficiency of applicable terrorism legislation on coverage; the
difficulty in predicting the company's potential exposure for asbestos
and environmental claims; the response of reinsurance companies under
reinsurance contracts and the availability, pricing and adequacy of
reinsurance to protect the company against losses; actions by our
competitors, many of which are larger or have greater financial
resources than we do; the company's ability to distribute its products
through distribution channels, both current and future; the cost and
other effects of increased regulation as a result of the enactment of
the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010,
which, among other effects, vests a Financial Stability Oversight
Council with the power to designate “systemically important”
institutions, will require central clearing of, and/or impose new margin
and capital requirements on, derivatives transactions, and created a new
“Federal Insurance Office” within the U.S. Department of the Treasury;
unfavorable judicial or legislative developments; the potential effect
of other domestic and foreign regulatory developments, including those
that could adversely impact the demand for the company's products,
operating costs and required capital levels; regulatory limitations on
the ability of the company and certain of its subsidiaries to declare
and pay dividends; the company's ability to maintain the availability of
its systems and safeguard the security of its data in the event of a
disaster, cyber or other information security incident or other
unanticipated event; the risk that our framework for managing
operational risks may not be effective in mitigating material risk and
loss to the company; the potential for difficulties arising from
outsourcing relationships; the impact of changes in federal or state tax
laws; regulatory requirements that could delay, deter or prevent a
takeover attempt that shareholders might consider in their best
interests; the impact of potential changes in accounting principles and
related financial reporting requirements; the company's ability to
protect its intellectual property and defend against claims of
infringement; the company's ability to implement its capital plan; and
other factors described in such forward-looking statements and other
factors described in The Hartford's 2012 Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q and other filings The Hartford makes with
the Securities and Exchange Commission.
Any forward-looking statement made by the company in this release speaks
only as of the date of this release. Factors or events that could cause
the company's actual results to differ may emerge from time to time, and
it is not possible for the company to predict all of them. The company
undertakes no obligation to publicly update any forward-looking
statement, whether as a result of new information, future developments
or otherwise.
![](http://cts.businesswire.com/ct/CT?id=bwnews&sty=20130429006641r1&sid=ntxv4&distro=nx)