The Hartford (NYSE:HIG) reported core earnings of $452 million for the
three months ended March 31, 2015 (first quarter 2015), down $49
million, or 10%, from $501 million in first quarter 2014. The decrease
from first quarter 2014 was primarily due to a $32 million, after-tax,
benefit for New York State Workers' Compensation Board assessments (NY
Assessments) in first quarter 2014 and a $25 million, after-tax,
reduction in favorable property and casualty (P&C) prior year loss and
loss adjustment expense reserve development (PYD). Catastrophe losses
did not have a material impact on the change in core earnings, totaling
$54 million, after-tax, in first quarter 2015 and $56 million,
after-tax, in first quarter 2014.
First quarter 2015 core earnings per diluted share were $1.04, a 1%
decrease from $1.05 in first quarter 2014, as the accretive impact of
the 9% decrease in weighted average diluted common shares outstanding
and dilutive potential common shares largely offset the core earnings
decrease.
*Denotes financial measure not calculated in accordance with
generally accepted accounting principles (non-GAAP).
The decrease in weighted average common shares outstanding resulted from
the company's repurchase of 46.8 million shares since March 31, 2014,
including 6.1 million shares in first quarter 2015. As of March 31,
2015, the company had $729 million of remaining share repurchase
authorization through Dec. 31, 2015 under its current capital management
plan.
First quarter 2015 net income totaled $467 million, down $28 million, or
6%, from $495 million in first quarter 2014, due principally to the $49
million decrease in core earnings that was largely offset by a $36
million reduction in net realized capital losses, after-tax and deferred
acquisition costs (DAC), excluded from core earnings compared with first
quarter 2014. In addition, first quarter 2014 included $29 million of
income from discontinued operations earned by the Japan annuity business
that was sold in June 2014; first quarter 2015 did not have any income
from discontinued operations.
First quarter 2015 net income per diluted share was $1.08, up 5% from
$1.03 per diluted share in first quarter 2014 as the decrease in net
income was more than offset by the accretive impact of share repurchases.
"The Hartford is off to a good start in 2015, and all our businesses
performed well from a growth and earnings perspective," said The
Hartford's Chairman and CEO Christopher Swift. "We continue to execute
on our strategy and our businesses are delivering against their
operating and financial goals, despite continued low interest rates and
a U.S. P&C pricing cycle that is increasingly competitive. We are
well-positioned to navigate these challenges, as we remain a disciplined
underwriter committed to creating shareholder value."
"Our P&C and Group Benefits businesses started 2015 with solid results
and steady operating performance," said The Hartford's President Doug
Elliot. "The combined ratio was 91.7 before catastrophes and PYD, while
Group Benefits after-tax core earnings margin* rose to 5.9%. The
marketplace has grown more competitive over the last quarter, and we are
very focused on core metrics and key performance indicators as we
continue to balance margins and growth. Our operating focus and
investments in product, underwriting and technology provide us a strong
foundation moving forward.”
|
|
|
|
CONSOLIDATED FINANCIAL RESULTS
|
|
|
|
|
($ in millions except per share data)
|
|
|
Three Months Ended
|
|
|
Mar 31 2015
|
|
|
Mar 31 2014
|
|
|
Change2
|
Core earnings (loss):
|
|
|
|
|
|
|
|
|
|
Commercial Lines
|
|
|
$234
|
|
|
$264
|
|
|
(11)%
|
Personal Lines
|
|
|
$75
|
|
|
$101
|
|
|
(26)%
|
P&C Other Operations
|
|
|
$20
|
|
|
$21
|
|
|
(5)%
|
Property & Casualty (Combined)
|
|
|
$329
|
|
|
$386
|
|
|
(15)%
|
Group Benefits
|
|
|
$52
|
|
|
$45
|
|
|
16%
|
Mutual Funds
|
|
|
$22
|
|
|
$21
|
|
|
5%
|
Sub-total
|
|
|
$403
|
|
|
$452
|
|
|
(11)%
|
Talcott Resolution
|
|
|
$111
|
|
|
$112
|
|
|
(1)%
|
Corporate
|
|
|
$(62)
|
|
|
$(63)
|
|
|
2%
|
Core earnings
|
|
|
$452
|
|
|
$501
|
|
|
(10)%
|
Net income
|
|
|
$467
|
|
|
$495
|
|
|
(6)%
|
Weighted average diluted common shares outstanding
|
|
|
433.7
|
|
|
478.6
|
|
|
(9)%
|
Core earnings available to common shareholders per diluted share¹
|
|
|
$1.04
|
|
|
$1.05
|
|
|
(1)%
|
Net income available to common shareholders per diluted share¹
|
|
|
$1.08
|
|
|
$1.03
|
|
|
5%
|
[1] Includes dilutive potential common shares
[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
COMMERCIAL LINES
First Quarter 2015 Highlights:
-
Core earnings were essentially flat with first quarter 2014, excluding
the $32 million, after-tax, NY Assessments benefit recognized in first
quarter 2014
-
Combined ratio before catastrophes and PYD of 92.4 improved 0.4 point
over first quarter 2014, excluding the 3.2 point benefit from NY
Assessments
-
Catastrophes and PYD were slightly higher than first quarter 2014
|
|
|
|
|
|
|
|
|
|
COMMERCIAL LINES
|
|
|
|
|
|
|
|
|
|
($ in millions)
|
|
|
Three Months Ended
|
|
|
|
Mar 31 2015
|
|
|
Mar 31 2014
|
|
|
Change
|
Core earnings¹
|
|
|
$234
|
|
|
$264
|
|
|
(11)%
|
Net income¹
|
|
|
$240
|
|
|
$242
|
|
|
(1)%
|
Underwriting gain¹*
|
|
|
$65
|
|
|
$107
|
|
|
(39)%
|
Net investment income
|
|
|
$257
|
|
|
$256
|
|
|
—
|
Combined ratio²
|
|
|
95.9
|
|
|
93.1
|
|
|
(2.8)
|
Catastrophes and PYD
|
|
|
3.6
|
|
|
3.4
|
|
|
(0.2)
|
Combined ratio before catastrophes and PYD²
|
|
|
92.4
|
|
|
89.6
|
|
|
(2.8)
|
Small Commercial:
|
|
|
|
|
|
|
|
|
|
Combined ratio before catastrophes and PYD²
|
|
|
89.6
|
|
|
85.9
|
|
|
(3.7)
|
New business premium
|
|
|
$140
|
|
|
$131
|
|
|
7%
|
Policy count retention
|
|
|
85%
|
|
|
83%
|
|
|
2.0
|
Middle Market:
|
|
|
|
|
|
|
|
|
|
Combined ratio before catastrophes and PYD²
|
|
|
93.7
|
|
|
92.2
|
|
|
(1.5)
|
New business premium
|
|
|
$124
|
|
|
$110
|
|
|
13%
|
Policy count retention
|
|
|
81%
|
|
|
81%
|
|
|
—
|
Written premiums
|
|
|
$1,722
|
|
|
$1,669
|
|
|
3%
|
Standard Commercial renewal written pricing increases
|
|
|
3%
|
|
|
6%
|
|
|
(3.0)
|
[1] Includes $32 million, after-tax expense benefit in first quarter
2014 from NY Assessments
[2] Commercial Lines, Small
Commercial and Middle Market combined ratios include an expense ratio
benefit of 3.2 point, 3.3 point and 2.6 point, respectively, in first
quarter 2014 from NY Assessments
Core earnings in Commercial Lines decreased 11% in first quarter 2015 to
$234 million from $264 million in first quarter 2014 largely due to an
expense benefit in first quarter 2014 of $32 million, after-tax, from NY
Assessments. Excluding this benefit, first quarter 2015 core earnings
were essentially flat to the prior year period. An improvement in
underwriting margins on workers’ compensation due to earned pricing
increases and moderate loss costs was offset by higher expenses,
excluding NY Assessments, due to higher underwriting expenses. Net
investment income was essentially flat at $257 million, before tax, as
both periods reflected strong investment income on limited partnerships
and other alternative investments (LPs).
Commercial Lines underwriting gain totaled $65 million, before tax, in
first quarter 2015 for a 95.9 combined ratio compared with a first
quarter 2014 underwriting gain of $107 million, before tax, for a 93.1
combined ratio. The decrease in underwriting gain and increase in
combined ratio was principally due to the $49 million, before tax,
favorable benefit of NY Assessments in first quarter 2014. Excluding the
impact of NY Assessments, first quarter 2015 underwriting gain and
combined ratio improved by $7 million and 0.4 point, respectively, over
the prior year period. In addition to NY Assessments, favorable PYD
decreased in Commercial Lines in first quarter 2015 to $2 million,
before tax, compared with net favorable PYD of $7 million, before tax,
in first quarter 2014. The favorable PYD in first quarter 2015 was
primarily driven by the professional and general liability lines, and
was largely offset by commercial auto liability strengthening.
Catastrophe losses were essentially flat between the two periods at $58
million, before tax, compared with $60 million, before tax, in first
quarter 2014.
First quarter 2015 combined ratio before catastrophes and PYD was 92.4,
a 0.4 point improvement over first quarter 2014 excluding the 3.2 point
expense ratio benefit from NY Assessments in first quarter 2014. The
improvement was largely driven by Middle Market, which had a 93.7
combined ratio before catastrophes and PYD, a 1.1 point improvement over
first quarter 2014 excluding the NY Assessments. The improvement in
Middle Market combined ratio before catastrophes and PYD resulted from
pricing and underwriting initiatives over the past several years, as
well as continued modest loss cost inflation. Excluding NY Assessments,
Small Commercial's combined ratio before catastrophes and PYD rose 0.4
point to 89.6, reflecting increased underwriting expenses as a result of
business investments and higher agency supplemental compensation as a
result of loss ratio improvements.
First quarter 2015 written premiums in Commercial Lines grew 3% to
$1,722 million over first quarter 2014, reflecting renewal written price
increases and strong retention in Small Commercial and Middle Market,
which together comprise 87% of Commercial Lines written premiums. Policy
count retention in Small Commercial increased 2.0 points over first
quarter 2014 to 85%, while in Middle Market retention remained stable at
81%. First quarter 2015 renewal written price increases averaged 3% in
Standard Commercial, which included 3% in Small Commercial and 2% in
Middle Market, exclusive of specialty programs and livestock. Written
premiums also benefited from increased new business premiums, rising 7%
over first quarter 2014 in Small Commercial and 13% in Middle Market.
PERSONAL LINES
First Quarter 2015 Highlights:
-
Written premiums rose 1% over first quarter 2014 due to continued
strong renewal written price increases
-
Combined ratio before catastrophes and PYD of 89.9 increased 1.2
points compared with 88.7 in first quarter 2014 due to higher
automobile liability losses and physical damage severity
-
Underwriting gain of $75 million decreased from $113 million in first
quarter 2014 primarily due to less favorable PYD
PERSONAL LINES
|
|
|
|
|
|
|
|
|
|
($ in millions)
|
|
|
Three Months Ended
|
|
|
|
Mar 31 2015
|
|
|
Mar 31 2014
|
|
|
Change
|
Core earnings
|
|
|
$75
|
|
|
$101
|
|
|
(26)%
|
Net income
|
|
|
$76
|
|
|
$99
|
|
|
(23)%
|
Underwriting gain
|
|
|
$75
|
|
|
$113
|
|
|
(34)%
|
Net investment income
|
|
|
$35
|
|
|
$35
|
|
|
—
|
Combined ratio
|
|
|
92.1
|
|
|
87.8
|
|
|
(4.3)
|
Catastrophes and PYD
|
|
|
2.2
|
|
|
(0.9)
|
|
|
(3.1)
|
Combined ratio before catastrophes and PYD
|
|
|
89.9
|
|
|
88.7
|
|
|
(1.2)
|
Automobile
|
|
|
94.6
|
|
|
92.8
|
|
|
(1.8)
|
Homeowners
|
|
|
79.7
|
|
|
78.8
|
|
|
(0.9)
|
Written premiums
|
|
|
$939
|
|
|
$927
|
|
|
1%
|
|
|
|
|
|
|
|
|
|
|
Core earnings in Personal Lines decreased 26% in first quarter 2015 over
the prior year quarter primarily due to a lower underwriting gain.
Personal Lines underwriting gain decreased $38 million, before tax, to
$75 million in first quarter 2015 compared with $113 million in first
quarter 2014 primarily due to less favorable PYD, which declined from
favorable PYD of $34 million, before tax, in first quarter 2014 to
favorable PYD of $4 million, before tax in first quarter 2015.
Catastrophes were essentially flat between the two periods, totaling $25
million, before tax, in first quarter 2015 compared with $26 million,
before tax, in first quarter 2014.
First quarter 2015 combined ratio increased 4.3 points to 92.1 from 87.8
in first quarter 2014 largely due to less favorable PYD. Catastrophes
and PYD were a net benefit of 0.9 point on the first quarter 2014
combined ratio versus a net 2.2 point expense in first quarter 2015.
First quarter 2015 combined ratio before catastrophes and PYD increased
1.2 points to 89.9 due to higher automobile liability losses and
physical damage severity compared with first quarter 2014.
First quarter 2015 Personal Lines written premiums rose 1% over first
quarter 2014 as higher first quarter 2015 renewal written price
increases were offset by lower retention compared to first quarter 2014.
Renewal written price increases in first quarter 2015 were 7% in
automobile and 8% in homeowners to address rate needs in certain
segments. First quarter 2015 automobile premium retention declined to
87%, down 2 points compared with first quarter 2014, while homeowners
premium retention declined 3 points to 90%. New business premium in
first quarter 2015 was impacted by underwriting actions in certain
segments, declining 6% to $128 million over first quarter 2014 with
decreases of 3% in automobile and 16% in homeowners.
GROUP BENEFITS
First Quarter 2015 Highlights:
-
Core earnings of $52 million increased 16% over first quarter 2014
with improved group disability and group life results, excluding
Association-Financial Institutions business
-
After-tax core earnings margin* increased to 5.9% from 5.1% in first
quarter 2014
-
Total fully insured ongoing sales rose 67%, up 40% for group
disability and 87% for group life, over first quarter 2014
GROUP BENEFITS
|
|
|
|
|
|
|
|
|
|
($ in millions)
|
|
|
Three Months Ended
|
|
|
|
Mar 31 2015
|
|
|
Mar 31 2014
|
|
|
Change
|
Core earnings1
|
|
|
$52
|
|
|
$45
|
|
|
16%
|
Net income
|
|
|
$52
|
|
|
$51
|
|
|
2%
|
Fully insured ongoing premiums, excluding A-FI2
|
|
|
$763
|
|
|
$732
|
|
|
4%
|
Loss ratio, excluding A-FI
|
|
|
76.7%
|
|
|
77.6%
|
|
|
0.9
|
Expense ratio, excluding A-FI
|
|
|
26.7%
|
|
|
27.4%
|
|
|
0.7
|
Net investment income
|
|
|
$97
|
|
|
$96
|
|
|
1%
|
After-tax core earnings margin*
|
|
|
5.9%
|
|
|
5.1%
|
|
|
0.8
|
[1] Includes $0 and $1 from A-FI in the three months ended
March 31, 2015 and March 31, 2014, respectively
[2] Fully
insured ongoing premiums excludes buyout premiums and premium
equivalents; excludes A-FI premiums of $0 million and $44 million in
first quarter 2015 and 2014, respectively
First quarter 2015 Group Benefits core earnings totaled $52 million, a
16% increase from $45 million in first quarter 2014, primarily due to
improved group disability and group life loss ratios as well as a lower
expense ratio compared with first quarter 2014, excluding the
Association-Financial Institutions (A-FI) book of business. The A-FI
book, which was in the group life business, is now fully in runoff and
does not impact 2015 results, although it did impact the 2014 group life
loss and expense ratios in 2014. The after-tax core earnings margin
increased to 5.9% in first quarter 2015 from 5.1% in first quarter 2014.
The first quarter 2015 total loss ratio, excluding A-FI, was 76.7%, a
0.9 point improvement, reflecting a 0.6 point improvement in group
disability and 0.8 point improvement in group life compared with first
quarter 2014. The expense ratio, excluding A-FI, also improved,
declining 0.7 point to 26.7% in first quarter 2015.
First quarter 2015 fully insured ongoing premiums were $763 million, up
4% from first quarter 2014, excluding A-FI, reflecting increased sales,
higher persistency and improved pricing. Fully insured ongoing sales
totaled $300 million in first quarter 2015, up 67% over first quarter
2014. Group disability sales increased 40% to $123 million and group
life sales rose 87% to $148 million reflecting strong January 2015
sales, including several large accounts that returned to the company
after having moved to competitors in prior years.
MUTUAL FUNDS
First Quarter 2015 Highlights:
-
Mutual Fund sales of $4.7 billion increased 28% compared with first
quarter 2014
-
Mutual Fund net flows, which exclude Talcott Resolution assets under
management (AUM), were $529 million
-
Mutual Fund core earnings rose 5% over first quarter 2014 to $22
million
MUTUAL FUNDS
|
|
|
|
|
|
|
|
|
|
($ in millions)
|
|
|
Three Months Ended
|
|
|
|
Mar 31 2015
|
|
|
Mar 31 2014
|
|
|
Change
|
Core earnings
|
|
|
$22
|
|
|
$21
|
|
|
5%
|
Net income
|
|
|
$22
|
|
|
$21
|
|
|
5%
|
Mutual Fund sales
|
|
|
$4,710
|
|
|
$3,692
|
|
|
28%
|
Mutual Fund net flows
|
|
|
$529
|
|
|
$18
|
|
|
NM
|
Mutual Fund AUM
|
|
|
$75,696
|
|
|
$73,346
|
|
|
3%
|
Talcott AUM
|
|
|
$20,240
|
|
|
$24,957
|
|
|
(19)%
|
Total Mutual Funds segment AUM
|
|
|
$95,936
|
|
|
$98,303
|
|
|
(2)%
|
|
|
|
|
|
|
|
|
|
|
Core earnings for the Mutual Funds segment rose 5% to $22 million in
first quarter 2015 compared with first quarter 2014 due to increased
revenues resulting from higher Mutual Fund AUM compared with first
quarter 2014. During the quarter, Mutual Fund net flows were $529
million, benefiting from a 28% increase in sales during the quarter.
Total AUM for the segment declined 2% due to the continued runoff of
Talcott Resolution AUM, which decreased 19% over the last twelve months
to $20.2 billion at March 31, 2015. Mutual Fund AUM increased to $75.7
billion at March 31, 2015 from $73.3 billion at March 31, 2014 primarily
due to higher market levels and strong sales over the period.
TALCOTT RESOLUTION
First Quarter 2015 Highlights:
-
Core earnings decreased 1% to $111 million due to the continued runoff
of the variable annuity block, partially offset by lower expenses
-
Variable annuity contract counts declined 3% and 13% from Dec. 31,
2014 and March 31, 2014, respectively
-
Fixed annuity contract counts declined 1% and 16% from Dec. 31, 2014
and March 31, 2014, respectively
TALCOTT RESOLUTION
|
|
|
|
|
|
|
|
|
|
($ in millions)
|
|
|
Three Months Ended
|
|
|
|
Mar 31 2015
|
|
|
Mar 31 2014
|
|
|
Change
|
Core earnings
|
|
|
$111
|
|
|
$112
|
|
|
(1)%
|
Net income
|
|
|
$111
|
|
|
$145
|
|
|
(23)%
|
VA contract count (in thousands)
|
|
|
653
|
|
|
747
|
|
|
(13)%
|
Fixed annuity and other contract count (in thousands)
|
|
|
137
|
|
|
163
|
|
|
(16)%
|
|
|
|
|
|
|
|
|
|
|
Talcott Resolution first quarter 2015 core earnings were $111 million, a
1% decrease from first quarter 2014, due to the decrease in variable
annuity (VA) fees as a result of the runoff of the block, largely offset
by lower expenses, including lower costs related to contract holder
initiatives.
VA and fixed annuity contract counts as of March 31, 2015 declined 3%
and 1%, respectively, from Dec. 31, 2014 and 13% and 16%, respectively,
from March 31, 2014.
INVESTMENTS
First Quarter 2015 Highlights:
-
Annualized investment yield, excluding LPs, before tax, was 4.1%, down
from 4.2% in first quarter 2014, primarily due to lower reinvestment
rates over the 12 months
-
Annualized investment yield on LPs, before tax, was 14%, up from 13%
in first quarter 2014 and above the company's outlook of 6%
-
Net impairment losses, including mortgage loan loss reserves, totaled
$15 million, before tax
INVESTMENTS
|
|
|
|
|
|
|
|
|
|
($ in millions)
|
|
|
Three Months Ended
|
Amounts presented before tax
|
|
|
Mar 31 2015
|
|
|
Mar 31 2014
|
|
|
Change
|
Total investments excluding equity securities, trading
|
|
|
$76,565
|
|
|
$79,666
|
|
|
(4
|
)%
|
Net investment income on LPs
|
|
|
$99
|
|
|
$97
|
|
|
2
|
%
|
Net investment income
|
|
|
$809
|
|
|
$824
|
|
|
(2
|
)%
|
Net impairment losses, including mortgage loan loss reserves
|
|
|
$15
|
|
|
$22
|
|
|
(32
|
)%
|
Annualized investment yield1
|
|
|
4.5%
|
|
|
4.5%
|
|
|
—
|
|
Annualized investment yield on LPs
|
|
|
13.7%
|
|
|
13.0%
|
|
|
0.7
|
|
Annualized investment yield, excluding LPs
|
|
|
4.1%
|
|
|
4.2%
|
|
|
(0.1
|
)
|
[1] Yields, before tax, calculated using annualized net
investment income divided by the monthly average invested assets at
cost, amortized cost, or adjusted carrying value, as applicable,
excluding repurchase agreement collateral, if any, and derivatives book
value.
First quarter 2015 net investment income totaled $809 million, before
tax, a 2% decrease from first quarter 2014 due to a decrease in total
investments excluding equity securities, trading. The carrying value of
total invested assets, excluding equity securities, trading, declined to
$76.6 billion at March 31, 2015 compared with $79.7 billion at March 31,
2014 largely due to the runoff of Talcott Resolution, including the sale
of the Japan annuity business in second quarter 2014. LPs did not have a
material impact on the change in net investment income in the quarter,
with first quarter 2015 net investment income on LPs of $99 million,
before tax, compared with $97 million, before tax, in first quarter 2014.
Excluding the impact of lower invested assets, investment income
remained relatively consistent with first quarter 2014 as annualized
yield, before tax, was 4.5% in both periods. Annualized yield, before
tax, on LPs increased to 13.7% compared with 13.0% in first quarter
2014. Annualized investment yield excluding LPs, before tax, declined
slightly from 4.2% in first quarter 2014 to 4.1%, primarily due to lower
reinvestment rates over the past 12 months.
The credit performance of the company's general account assets remained
strong. Net impairment losses in first quarter 2015, including changes
in mortgage loan loss reserves, totaled $15 million, before tax, down
from $22 million, before tax, in first quarter 2014.
STOCKHOLDERS’ EQUITY
First Quarter 2015 Highlights:
-
Book value per diluted share, excluding accumulated other
comprehensive income (AOCI)*, of $41.47 rose 2% over Dec. 31, 2014 and
3% over March 31, 2014
-
Company share repurchases totaled $250 million during first quarter
2015 and $1.746 billion over the past four quarters
-
Weighted average diluted common shares outstanding decreased 2% from
Dec. 31, 2014 and 9% from March 31, 2014
($ in millions)
|
|
|
As of
|
|
|
|
Mar 31 2015
|
|
|
Dec 31 2014
|
|
|
Change
|
Stockholders' equity
|
|
|
$19,077
|
|
|
$18,720
|
|
|
2%
|
Stockholders' equity (ex. AOCI)
|
|
|
$17,927
|
|
|
$17,792
|
|
|
1%
|
Book value per diluted share
|
|
|
$44.13
|
|
|
$42.84
|
|
|
3%
|
Book value per diluted share (ex. AOCI)
|
|
|
$41.47
|
|
|
$40.71
|
|
|
2%
|
Weighted average common shares outstanding
|
|
|
422.6
|
|
|
429.6
|
|
|
(2)%
|
Weighted average diluted common shares outstanding
|
|
|
433.7
|
|
|
442.6
|
|
|
(2)%
|
|
|
|
|
|
|
|
|
|
|
The Hartford’s stockholders’ equity was $19.1 billion as of March 31,
2015, a 2% increase from $18.7 billion as of Dec. 31, 2014, primarily
due to net income of $467 million and a $222 million increase in AOCI,
partially offset by common share repurchases of $250 million and common
dividends of $75 million.
Book value per diluted common share was $44.13 as of March 31, 2015, an
increase of 3% from Dec. 31, 2014, as a result of the 2% increase in
shareholders' equity and the impact of share repurchases on weighted
average diluted common shares outstanding. Excluding AOCI, book value
per diluted common share was up 2% to $41.47 as of March 31, 2015
compared with $40.71 at Dec. 31, 2014.
Weighted average common shares outstanding and weighted average diluted
common shares outstanding both decreased by 2% to 422.6 million and
433.7 million, respectively, at March 31, 2015 from Dec. 31, 2014 as a
result of the company's repurchase of 6.1 million common shares for $250
million, at an average price of $40.82 per share. Under the capital
management plan announced in 2014, the company has $2.775 billion of
equity repurchase authorization for the period Jan. 1, 2014 through Dec.
31, 2015. As of April 24, 2015, the company has spent $2.119 billion for
equity repurchases under this program, including $73 million since March
31, 2014.
On April 24, 2015 the company announced that it will redeem for cash the
entire $296 million aggregate principal amount outstanding of 4.0%
senior notes due Oct. 15, 2017 on May 27, 2015. The notes will be
redeemed at an estimated redemption price of approximately $320 million
including a make-whole premium and any interest accrued and unpaid to
the redemption date. The company expects to use cash on hand to finance
the redemption. The company expects to use an additional $180 million
for other debt repayment actions, depending on market conditions.
CONFERENCE CALL
The Hartford will discuss its first quarter 2015 financial results in a
webcast on Tuesday, April 28, 2015, at 9 a.m. EDT. The webcast can be
accessed live or as a replay through the investor relations section of
The Hartford's website at http://ir.thehartford.com.
More detailed financial information can be found in The Hartford's
Quarterly Report on Form 10-Q, the Investor Financial Supplement for
March 31, 2015, and the First Quarter 2015 Financial Results
Presentation, which includes the company's outlook for second quarter
2015 financial results, all of which are available at http://ir.thehartford.com.
ABOUT THE HARTFORD
With more than 200 years of expertise, The Hartford (NYSE:HIG) is a
leader in property and casualty insurance, group benefits and mutual
funds. The company is widely recognized for its service excellence,
sustainability practices, trust and integrity. More information on the
company and its financial performance is available at www.thehartford.com.
From time to time, The Hartford uses its website to disseminate material
company information. Financial and other important information regarding
The Hartford is routinely accessible through and posted on our website
at http://ir.thehartford.com.
In addition, you may automatically receive email alerts and other
information about The Hartford when you enroll your email address by
visiting the “Email Alerts” section at http://ir.thehartford.com.
HIG-F
|
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
|
CONSOLIDATING INCOME STATEMENTS
|
Three Months Ended March 31, 2015
|
($ in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property & Casualty
|
|
|
Group Benefits
|
|
|
Mutual Funds
|
|
|
Talcott Resolution
|
|
|
Corporate
|
|
|
Consolidated
|
Earned premiums
|
|
|
$
|
2,535
|
|
|
|
$
|
763
|
|
|
|
$
|
—
|
|
|
|
$
|
24
|
|
|
|
$
|
—
|
|
|
|
$
|
3,322
|
|
Fee income
|
|
|
—
|
|
|
|
17
|
|
|
|
179
|
|
|
|
261
|
|
|
|
2
|
|
|
|
459
|
|
Net investment income
|
|
|
327
|
|
|
|
97
|
|
|
|
—
|
|
|
|
382
|
|
|
|
3
|
|
|
|
809
|
|
Other revenues
|
|
|
22
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
22
|
|
Net realized capital gains (losses)
|
|
|
13
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
(25
|
)
|
|
|
18
|
|
|
|
5
|
|
Total revenues
|
|
|
2,897
|
|
|
|
876
|
|
|
|
179
|
|
|
|
642
|
|
|
|
23
|
|
|
|
4,617
|
|
Benefits, losses, and loss adjustment expenses
|
|
|
1,627
|
|
|
|
598
|
|
|
|
—
|
|
|
|
338
|
|
|
|
—
|
|
|
|
2,563
|
|
Amortization of deferred policy acquisition costs
|
|
|
324
|
|
|
|
8
|
|
|
|
5
|
|
|
|
50
|
|
|
|
—
|
|
|
|
387
|
|
Insurance operating costs and other expenses
|
|
|
470
|
|
|
|
200
|
|
|
|
140
|
|
|
|
121
|
|
|
|
7
|
|
|
|
938
|
|
Interest expense
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
94
|
|
|
|
94
|
|
Restructuring and other costs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10
|
|
|
|
10
|
|
Total benefits and expenses
|
|
|
2,421
|
|
|
|
806
|
|
|
|
145
|
|
|
|
509
|
|
|
|
111
|
|
|
|
3,992
|
|
Income (loss) from continuing operations, before income taxes
|
|
|
476
|
|
|
|
70
|
|
|
|
34
|
|
|
|
133
|
|
|
|
(88
|
)
|
|
|
625
|
|
Income tax expense (benefit)
|
|
|
137
|
|
|
|
18
|
|
|
|
12
|
|
|
|
22
|
|
|
|
(31
|
)
|
|
|
158
|
|
Net income (loss)
|
|
|
339
|
|
|
|
52
|
|
|
|
22
|
|
|
|
111
|
|
|
|
(57
|
)
|
|
|
467
|
|
Less: Unlock charge, after-tax
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
19
|
|
|
|
—
|
|
|
|
19
|
|
Less: Net realized capital gains (losses), after-tax and DAC,
excluded from core earnings
|
|
|
10
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(19
|
)
|
|
|
11
|
|
|
|
2
|
|
Less: Restructuring and other costs, after-tax
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(6
|
)
|
|
|
(6
|
)
|
Core earnings (losses)
|
|
|
$
|
329
|
|
|
|
$
|
52
|
|
|
|
$
|
22
|
|
|
|
$
|
111
|
|
|
|
$
|
(62
|
)
|
|
|
$
|
452
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
|
PROPERTY & CASUALTY
|
CONSOLIDATING INCOME STATEMENTS
|
Three Months Ended March 31, 2015
|
($ in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Lines
|
|
|
Personal Lines
|
|
|
P&C Other
|
|
|
Property & Casualty (Combined)
|
Written premiums
|
|
|
$
|
1,722
|
|
|
|
$
|
939
|
|
|
|
$
|
—
|
|
|
|
$
|
2,661
|
|
Change in unearned premium reserve
|
|
|
139
|
|
|
|
(13
|
)
|
|
|
—
|
|
|
|
126
|
|
Earned premiums
|
|
|
1,583
|
|
|
|
952
|
|
|
|
—
|
|
|
|
2,535
|
|
Losses and loss adjustment expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Current accident year before catastrophes
|
|
|
928
|
|
|
|
618
|
|
|
|
—
|
|
|
|
1,546
|
|
Current accident year catastrophes
|
|
|
58
|
|
|
|
25
|
|
|
|
—
|
|
|
|
83
|
|
Prior year development
|
|
|
(2
|
)
|
|
|
(4
|
)
|
|
|
4
|
|
|
|
(2
|
)
|
Total losses and loss adjustment expenses
|
|
|
984
|
|
|
|
639
|
|
|
|
4
|
|
|
|
1,627
|
|
Amortization of DAC
|
|
|
234
|
|
|
|
90
|
|
|
|
—
|
|
|
|
324
|
|
Underwriting expenses
|
|
|
295
|
|
|
|
148
|
|
|
|
6
|
|
|
|
449
|
|
Dividends to policyholders
|
|
|
5
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5
|
|
Underwriting gain (loss)
|
|
|
65
|
|
|
|
75
|
|
|
|
(10
|
)
|
|
|
130
|
|
Net investment income
|
|
|
257
|
|
|
|
35
|
|
|
|
35
|
|
|
|
327
|
|
Net realized capital gains
|
|
|
8
|
|
|
|
1
|
|
|
|
4
|
|
|
|
13
|
|
Net servicing and other income
|
|
|
5
|
|
|
|
—
|
|
|
|
1
|
|
|
|
6
|
|
Income from continuing operations before income taxes
|
|
|
335
|
|
|
|
111
|
|
|
|
30
|
|
|
|
476
|
|
Income tax expense
|
|
|
95
|
|
|
|
35
|
|
|
|
7
|
|
|
|
137
|
|
Net income
|
|
|
240
|
|
|
|
76
|
|
|
|
23
|
|
|
|
339
|
|
Less: Net realized capital gains, after-tax and DAC, excluded from
core earnings
|
|
|
6
|
|
|
|
1
|
|
|
|
3
|
|
|
|
10
|
|
Core earnings
|
|
|
$
|
234
|
|
|
|
$
|
75
|
|
|
|
$
|
20
|
|
|
|
$
|
329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
|
CONSOLIDATING INCOME STATEMENTS
|
Three Months Ended March 31, 2014
|
($ in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property & Casualty
|
|
|
Group Benefits
|
|
|
Mutual Funds
|
|
|
Talcott Resolution
|
|
|
Corporate
|
|
|
Consolidated
|
Earned premiums
|
|
|
$
|
2,469
|
|
|
|
$
|
784
|
|
|
|
$
|
—
|
|
|
|
$
|
49
|
|
|
|
$
|
—
|
|
|
|
$
|
3,302
|
|
Fee income
|
|
|
—
|
|
|
|
15
|
|
|
|
174
|
|
|
|
304
|
|
|
|
3
|
|
|
|
496
|
|
Net investment income
|
|
|
326
|
|
|
|
96
|
|
|
|
—
|
|
|
|
400
|
|
|
|
2
|
|
|
|
824
|
|
Other revenues
|
|
|
25
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
25
|
|
Net realized capital gains (losses)
|
|
|
(37
|
)
|
|
|
8
|
|
|
|
—
|
|
|
|
3
|
|
|
|
(9
|
)
|
|
|
(35
|
)
|
Total revenues
|
|
|
2,783
|
|
|
|
903
|
|
|
|
174
|
|
|
|
756
|
|
|
|
(4
|
)
|
|
|
4,612
|
|
Benefits, losses, and loss adjustment expenses
|
|
|
1,570
|
|
|
|
597
|
|
|
|
—
|
|
|
|
409
|
|
|
|
—
|
|
|
|
2,576
|
|
Amortization of deferred policy acquisition costs
|
|
|
311
|
|
|
|
9
|
|
|
|
9
|
|
|
|
67
|
|
|
|
—
|
|
|
|
396
|
|
Insurance operating costs and other expenses
|
|
|
396
|
|
|
|
228
|
|
|
|
132
|
|
|
|
148
|
|
|
|
12
|
|
|
|
916
|
|
Interest expense
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
95
|
|
|
|
95
|
|
Restructuring and other costs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
20
|
|
|
|
20
|
|
Total benefits and expenses
|
|
|
2,277
|
|
|
|
834
|
|
|
|
141
|
|
|
|
624
|
|
|
|
127
|
|
|
|
4,003
|
|
Income (loss) from continuing operations before income taxes
|
|
|
506
|
|
|
|
69
|
|
|
|
33
|
|
|
|
132
|
|
|
|
(131
|
)
|
|
|
609
|
|
Income tax expense (benefit)
|
|
|
143
|
|
|
|
18
|
|
|
|
12
|
|
|
|
16
|
|
|
|
(46
|
)
|
|
|
143
|
|
Income (loss) from continuing operations, after tax
|
|
|
363
|
|
|
|
51
|
|
|
|
21
|
|
|
|
116
|
|
|
|
(85
|
)
|
|
|
466
|
|
Income from discontinued operations, after-tax
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
29
|
|
|
|
—
|
|
|
|
29
|
|
Net income (loss)
|
|
|
363
|
|
|
|
51
|
|
|
|
21
|
|
|
|
145
|
|
|
|
(85
|
)
|
|
|
495
|
|
Less: Unlock charge, after-tax
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12
|
|
|
|
—
|
|
|
|
12
|
|
Less: Net realized capital gains (losses) and other, after-tax and
DAC, excluded from core earnings
|
|
|
(23
|
)
|
|
|
6
|
|
|
|
—
|
|
|
|
(8
|
)
|
|
|
(9
|
)
|
|
|
(34
|
)
|
Less: Restructuring and other costs, after-tax
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(13
|
)
|
|
|
(13
|
)
|
Less: Income from discontinued operations, after-tax
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
29
|
|
|
|
—
|
|
|
|
29
|
|
Core earnings (losses)
|
|
|
$
|
386
|
|
|
|
$
|
45
|
|
|
|
$
|
21
|
|
|
|
$
|
112
|
|
|
|
$
|
(63
|
)
|
|
|
$
|
501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
|
PROPERTY & CASUALTY
|
CONSOLIDATING INCOME STATEMENTS
|
Three Months Ended March 31, 2014
|
($ in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Lines
|
|
|
Personal Lines
|
|
|
P&C Other
|
|
|
Property & Casualty (Combined)
|
Written premiums
|
|
|
$
|
1,669
|
|
|
|
$
|
927
|
|
|
|
$
|
1
|
|
|
|
$
|
2,597
|
|
Change in unearned premium reserve
|
|
|
128
|
|
|
|
(1
|
)
|
|
|
1
|
|
|
|
128
|
|
Earned premiums
|
|
|
1,541
|
|
|
|
928
|
|
|
|
—
|
|
|
|
2,469
|
|
Losses and loss adjustment expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Current accident year before catastrophes
|
|
|
934
|
|
|
|
590
|
|
|
|
—
|
|
|
|
1,524
|
|
Current accident year catastrophes
|
|
|
60
|
|
|
|
26
|
|
|
|
—
|
|
|
|
86
|
|
Prior year development
|
|
|
(7
|
)
|
|
|
(34
|
)
|
|
|
1
|
|
|
|
(40
|
)
|
Total losses and loss adjustment expenses
|
|
|
987
|
|
|
|
582
|
|
|
|
1
|
|
|
|
1,570
|
|
Amortization of DAC
|
|
|
226
|
|
|
|
85
|
|
|
|
—
|
|
|
|
311
|
|
Underwriting expenses
|
|
|
217
|
|
|
|
148
|
|
|
|
7
|
|
|
|
372
|
|
Dividends to policyholders
|
|
|
4
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4
|
|
Underwriting gain (loss)
|
|
|
107
|
|
|
|
113
|
|
|
|
(8
|
)
|
|
|
212
|
|
Net investment income
|
|
|
256
|
|
|
|
35
|
|
|
|
35
|
|
|
|
326
|
|
Net realized capital losses
|
|
|
(32
|
)
|
|
|
(5
|
)
|
|
|
—
|
|
|
|
(37
|
)
|
Net servicing and other income
|
|
|
1
|
|
|
|
4
|
|
|
|
—
|
|
|
|
5
|
|
Income from continuing operations before income taxes
|
|
|
332
|
|
|
|
147
|
|
|
|
27
|
|
|
|
506
|
|
Income tax expense
|
|
|
90
|
|
|
|
48
|
|
|
|
5
|
|
|
|
143
|
|
Net income
|
|
|
242
|
|
|
|
99
|
|
|
|
22
|
|
|
|
363
|
|
Less: Net realized capital gains (losses), after-tax and DAC,
excluded from core earnings
|
|
|
(22
|
)
|
|
|
(2
|
)
|
|
|
1
|
|
|
|
(23
|
)
|
Core earnings
|
|
|
$
|
264
|
|
|
|
$
|
101
|
|
|
|
$
|
21
|
|
|
|
$
|
386
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
first quarter 2015, 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 is set forth below.
|
|
|
As of
|
|
|
|
Mar 31 2015
|
|
|
Dec 31 2014
|
|
|
Change
|
Book value per diluted common share, including AOCI
|
|
|
$44.13
|
|
|
$42.84
|
|
|
3%
|
Less: Per diluted share impact of AOCI
|
|
|
$2.66
|
|
|
$2.13
|
|
|
25%
|
Book value per diluted common share, excluding AOCI
|
|
|
$41.47
|
|
|
$40.71
|
|
|
2%
|
|
|
|
|
|
|
|
|
|
|
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,
certain restructuring charges, pension settlements, loss on
extinguishment of debt, reinsurance gains and losses on business
disposition transactions, income tax benefit from reduction in valuation
allowance, discontinued operations, 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, 2015 and 2014, is included in this press
release. A reconciliation of core earnings to net income (loss) for
individual reporting segments can be found in this press release under
the heading "The Hartford Financial Services Group, Inc. Consolidating
Income Statements" and in The Hartford's Investor Financial Supplement
for the quarter ended March 31, 2015.
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, 2015 and 2014 is
provided in the table below.
|
|
|
Three Months Ended
|
|
|
|
Mar 31
2015
|
|
|
Mar 31 2014
|
|
|
Change
|
PER SHARE DATA
|
|
|
|
|
|
|
|
|
|
Diluted earnings (losses) per common share:
|
|
|
|
|
|
|
|
|
|
Core earnings available to common shareholders
|
|
|
$
|
1.04
|
|
|
|
$
|
1.05
|
|
|
|
(1
|
)%
|
Add: Unlock charge, after-tax
|
|
|
0.04
|
|
|
|
0.03
|
|
|
|
33
|
%
|
Add: Net realized capital gains (losses), after-tax and DAC,
excluded from core earnings
|
|
|
0.01
|
|
|
|
(0.08
|
)
|
|
|
(113
|
)%
|
Add: Restructuring and other costs, after-tax
|
|
|
(0.01
|
)
|
|
|
(0.03
|
)
|
|
|
(67
|
)%
|
Add: Loss from discontinued operations, after-tax
|
|
|
—
|
|
|
|
0.06
|
|
|
|
(100
|
)%
|
Net income available to common shareholders
|
|
|
$
|
1.08
|
|
|
|
$
|
1.03
|
|
|
|
5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
After-tax core earnings margin: The
Hartford uses the non-GAAP measure after-tax core earnings margin,
excluding buyouts, to evaluate, and believes it is an important measure
of, the Group Benefits segment's operating performance. After-tax margin
is the most directly comparable U.S. GAAP measure. The Company believes
that after-tax core earnings margin, excluding buyouts, provides
investors with a valuable measure of the performance of Group Benefits
because it reveals trends in the business that may be obscured by the
effect of buyouts. After-tax core earnings margin, excluding buyouts,
should not be considered as a substitute for after-tax margin and does
not reflect the overall profitability of Group Benefits. Therefore, the
Company believes it is important for investors to evaluate both
after-tax core earnings margin, excluding buyouts, and after-tax margin
when reviewing performance. After-tax core earnings margin, excluding
buyouts, is calculated by dividing core earnings, excluding buyouts, by
revenues, excluding buyouts and realized gains (losses). A
reconciliation of after-tax margin to after-tax core earnings margin,
excluding buyouts, for the quarterly periods ended March 31, 2015 and
2014, is set forth below.
|
|
|
Three Months Ended March 31,
|
After-tax margin
|
|
|
2015
|
|
|
2014
|
|
|
Change
|
After-tax margin (excluding buyouts)
|
|
|
5.9
|
%
|
|
|
5.7
|
%
|
|
|
0.2
|
|
Effect of net capital realized gains (losses), net of tax on
after-tax margin
|
|
|
—
|
%
|
|
|
0.6
|
%
|
|
|
(0.6
|
)
|
After-tax core earnings margin (excluding buyouts)
|
|
|
5.9
|
%
|
|
|
5.1
|
%
|
|
|
0.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting gain (loss): The Hartford's
management evaluates profitability of the Commercial and Personal Lines
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, 2015 and 2014, is set forth below.
|
|
|
Three Months Ended
|
|
|
|
Mar 31 2015
|
|
|
Mar 31 2014
|
Commercial Lines
|
|
|
|
|
|
|
Net income
|
|
|
$240
|
|
|
$242
|
Add: Income tax expense
|
|
|
95
|
|
|
90
|
Less: Other expenses (income)
|
|
|
1
|
|
|
(2)
|
Less: Net realized capital gains (losses)
|
|
|
8
|
|
|
(32)
|
Less: Net investment income
|
|
|
257
|
|
|
256
|
Less: Net servicing income
|
|
|
4
|
|
|
3
|
Underwriting gain
|
|
|
$65
|
|
|
$107
|
|
|
|
|
|
|
|
Personal Lines
|
|
|
|
|
|
|
Net income
|
|
|
$76
|
|
|
$99
|
Add: Income tax expense
|
|
|
35
|
|
|
48
|
Less: Other expenses
|
|
|
(1)
|
|
|
4
|
Less: Net realized capital gains (losses)
|
|
|
1
|
|
|
(5)
|
Less: Net investment income
|
|
|
35
|
|
|
35
|
Less: Net servicing income
|
|
|
1
|
|
|
—
|
Underwriting gain
|
|
|
$75
|
|
|
$113
|
|
|
|
|
|
|
|
Combined ratio before catastrophes and prior year
development: Combined ratio before catastrophes and prior year
development (PYD) 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 PYD represents the combined ratio for the current
accident year, excluding the impact of current accident year
catastrophes. 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 PYD for individual reporting
segments can be found in this press release under the headings
Commercial Lines and Personal Lines.
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 global political, economic and
market conditions, and the effect of financial market disruptions,
economic downturns or other potentially adverse macroeconomic
developments on the attractiveness of our products, the returns in our
investment portfolios and the hedging costs associated with our variable
annuities business; financial risk related to the continued reinvestment
of our investment portfolios and performance of our hedge program for
our runoff annuity block; market risks associated with our business,
including changes in interest rates, credit spreads, equity prices,
market volatility and foreign exchange rates, commodities prices and
implied volatility levels, as well as continuing uncertainty in key
sectors such as the global real estate market; the impact on our
investment portfolio if our investment portfolio is concentrated in any
particular segment of the economy; risk associated with the use of
analytical models in making decisions in key areas such as underwriting,
capital, hedging, reserving, and catastrophe risk management; 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 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 difficulty in predicting the Company’s
potential exposure for asbestos and environmental claims; the subjective
determinations that underlie the Company’s evaluation of
other-than-temporary impairments on available-for-sale securities; 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; losses due to nonperformance or defaults by others,
including reinsurers, sourcing partners, derivative counterparties and
other third parties; the potential for losses due to our reinsurers'
unwillingness or inability to meet their obligations under reinsurance
contracts and the availability, pricing and adequacy of reinsurance to
protect us against losses; 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; 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; technology
innovations, such as telematics and other usage-based methods of
determining premiums, auto technology advancements that improve driver
safety and technologies that facilitate ride or home sharing, that may
alter demand for the Company’s products, impact the frequency or
severity of losses and/or impact the way the Company markets,
distributes and underwrites its products; the possible occurrence of
terrorist attacks and the Company’s ability to contain its exposure,
including limitations on coverage from the federal government under
applicable reinsurance terrorism laws; volatility in our statutory and
United States ("U.S.") GAAP earnings and potential material changes to
our results resulting from our adjustment of our risk management program
to emphasize protection of economic value; the cost and other effects of
increased regulation as a result of the implementation of the Dodd-Frank
Wall Street Reform and Consumer Protection Act of 2010, and 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; unfavorable
judicial or legislative developments; regulatory limitations on the
ability of the Company and certain of its subsidiaries to declare and
pay dividends; the impact of changes in federal or state tax laws; the
impact of potential changes in accounting principles and related
financial reporting requirements; regulatory requirements that could
delay, deter or prevent a takeover attempt that shareholders might
consider in their best interests; the risks, challenges and
uncertainties associated with our capital management plan, expense
reduction initiatives and other actions, which may include acquisitions,
divestitures or restructurings; actions by our competitors, many of
which are larger or have greater financial resources than we do; the
Company’s ability to market, distribute and provide investment advisory
services in relation to our products through current and future
distribution channels and advisory firms; 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 and similar third-party relationships; the Company’s
ability to protect its intellectual property and defend against claims
of infringement; and other factors described in such forward-looking
statements and other factors described in such forward-looking
statements or in The Hartford's 2014 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=20150427006319r1&sid=ntxv4&distro=nx&lang=en)
Copyright Business Wire 2015