- Second quarter 2015 core earnings per
diluted share* of $0.91 compared with $0.31 in second quarter
2014
- Second quarter 2015 net income per
diluted share of $0.96 versus a net loss of $1.00 in second quarter
2014, which included a $1.32 loss from discontinued operations due
to the Japan annuity business sale
- Property & Casualty second quarter
2015 combined ratio before catastrophes and prior year unfavorable
loss reserve development* was 88.9, a 3.8 point improvement over
second quarter 2014
- Book value per diluted share, excluding
accumulated other comprehensive income*, was $42.41, up 8% over
June 30, 2014
- Equity repurchase plan increased by
$1.6 billion and extended through Dec. 31, 2016 and debt management
plan expanded to include repayment of $275 million maturing in
2016
- Increased quarterly common dividend by
$0.03 per share, or 17%, to $0.21 per share
The Hartford (NYSE:HIG) reported core earnings* of $389 million
for the three months ended June 30, 2015 (second quarter 2015), an
increase of $245 million from $144 million in second quarter 2014.
The increase was primarily due to improved underwriting results in
Property & Casualty (P&C) and higher core earnings in
Talcott Resolution. The improvement in P&C underwriting results
included better current accident year loss results and lower
unfavorable prior year loss and loss adjustment expense reserve
development (PYD) related to the company's annual ground-up
asbestos and environmental (A&E) study. Higher core earnings in
Talcott Resolution were due to a $48 million tax benefit and the
impact of strong investment income, principally from higher limited
partnership and other alternative investments (LPs).
Second quarter 2015 core earnings per diluted share was $0.91
compared with $0.31 in second quarter 2014, reflecting increased
core earnings as well as the 9% decrease in weighted average
diluted common shares outstanding over the past 12 months due to
the company's equity repurchases.
*Denotes financial measure not calculated in accordance with
generally accepted accounting principles (non-GAAP).
Second quarter 2015 net income totaled $413 million compared
with a net loss of $467 million in second quarter 2014, which
included a $617 million, after-tax, loss on discontinued operations
from the sale of the company's Japan annuities business. Excluding
this loss, second quarter 2015 net income improved $263 million
over second quarter 2014, largely as a result of the $245 million
increase in core earnings. Second quarter 2015 net income per
diluted share was $0.96 compared with a net loss of $1.00 per
diluted share in second quarter 2014.
“The Hartford delivered strong financial and operational
performance for the second quarter of 2015, reporting improved
results across all of our businesses,” said The Hartford's Chairman
and CEO Christopher Swift. “Reflecting our financial strength, we
also expanded our capital management plan and increased our
quarterly common stock dividend. Looking ahead, we have the right
strategy, capabilities and people to drive our continued success in
a dynamic marketplace.
“With our strategic and financial transformation essentially
complete, we are focused on profitably expanding our businesses. As
we consider management of excess capital in the future, we will
prioritize opportunities that accelerate our premium growth and
operating capabilities. In the event that we do not find
opportunities that meet our strategic and financial objectives, we
will continue to return excess capital to our shareholders,”
concluded Swift.
“Both Commercial and Personal Lines delivered improved
underwriting results, with a P&C combined ratio of 88.9 before
catastrophes and prior year development,” said The Hartford's
President Doug Elliot. “Operationally, we strengthened our
underwriting capabilities, increased distribution effectiveness and
added new leadership talent. In Group Benefits, we returned to
top-line growth while maintaining strong underwriting discipline
and reported a 6.3 percent after-tax core earnings margin.”
CONSOLIDATED FINANCIAL RESULTS
($ in millions except per share data)
Three Months
Ended
Jun 302015
Jun 302014
Change2 Core earnings (loss):
Commercial Lines $264 $213 24% Personal Lines $42 ($27) NM P&C
Other Operations $(113) $(146) 23% Property
& Casualty $193 $40 NM Group Benefits
$56 $52 8% Mutual Funds $22 $21
5%
Sub-total $271 $113
140% Talcott Resolution $171 $101
69% Corporate $(53) $(70) 24%
Core
earnings $389 $144
170% Net income (loss) $413 $(467) NM
Weighted average diluted common shares outstanding 428.1
467.9 (9)% Core earnings available to common
shareholders per diluted share¹ $0.91 $0.31
194% Net income (loss) available to common shareholders per diluted
share¹ $0.96 $(1.00) NM
[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
Second quarter 2015 financial results included the following
items that had a net unfavorable $87 million, after-tax, or $0.20
per diluted share, impact on both net income and core earnings:
- Unfavorable PYD in the P&C Other
segment of $134 million, after-tax, compared with $164 million,
after-tax, in second quarter 2014 for the company's annual
ground-up reserve study for A&E. The second quarter 2015 PYD
included $99 million, after-tax, for asbestos as a result of
greater than expected claim filings on a small number of peripheral
accounts; new claims trends on the majority of peripheral accounts,
particularly for mesothelioma, declined as expected since the prior
year. Unfavorable environmental PYD was $35 million, after-tax, due
to deterioration on a small number of insured businesses at
Superfund sites and higher new claims severity, although frequency
has declined;
- Excluding A&E, unfavorable PYD in
P&C totaled $14 million, after-tax;
- A $13 million, after-tax, benefit from
the resolution of litigation in P&C and
- A $48 million federal tax benefit in
Talcott Resolution.
Increase In and Extension of Capital Management Plan for
2014-2016
The Hartford also announced today that its board of directors
approved an increase in and extension of the company’s capital
management plan. The current equity repurchase plan was increased
by $1.6 billion and extended through Dec. 31, 2016. The debt
management plan was expanded to include the repayment of $275
million of debt maturing in 2016 and extended through Dec. 31,
2016. The board of directors also declared a quarterly dividend of
$0.21 per share of common stock, payable on Oct. 1, 2015, to
shareholders of record at the close of business on Sept. 1, 2015.
This represents an increase of $0.03 per share, or 17%, over the
prior quarterly dividend.
“By focusing on margin expansion within our P&C, Group
Benefits and Mutual Funds businesses and reducing the size and risk
of Talcott Resolution, we have significantly improved the company’s
financial strength, enabling us to expand our capital management
plan,” said The Hartford's Chief Financial Officer Beth Bombara.
“We continue to deepen our capabilities and are a strong competitor
in each of our chosen markets. We will maintain financial
flexibility and execute our strategy, including effectively
managing capital to create shareholder value.”
The 2014-2015 equity repurchase authorization initially
announced in February 2014 and increased in July 2014 totaled
$2.775 billion through Dec. 31, 2015. As of July 24, 2015, the
company had used approximately $2.4 billion of this authorization
for 63.4 million shares, including $250 million for 6.0 million
shares in second quarter 2015. Today’s approval extends the
approximately $398 million remaining under this plan through Dec.
31, 2016, and adds an additional $1.6 billion, for a total of
approximately $2.0 billion for equity repurchases through Dec. 31,
2016. The company currently intends to use this authorization
ratably through the end of 2016.
The 2014-2015 debt management plan initially announced in
February 2014 and expanded in July 2014 was comprised of the
expected repayment of $656 million for 2014 and 2015 debt
maturities and a debt management authorization of $500 million
through Dec. 31, 2015. Through June 30, 2015, the company had
repaid $489 million of maturing debt and utilized $317 million of
the debt management authorization, leaving $183 million outstanding
under the current authorization. Today the board of directors
authorized the extension of the $183 million remaining under the
debt management plan through Dec. 31, 2016. The company also
announced that it intends to repay $275 million of debt maturing in
2016 in addition to the remaining $167 million 2015 debt maturity
under the prior plan.
COMMERCIAL LINES
Second Quarter 2015 Highlights:
- Core earnings increased 24% over second
quarter 2014 due to improved underwriting results in all three
business lines
- Combined ratio before catastrophes and
PYD of 88.4 improved 4.7 points over second quarter 2014
- Standard Commercial renewal written
pricing increases averaged 3%, consistent with first quarter
2015
($ in millions)
Three Months Ended
Jun 302015
Jun 302014
Change Core earnings $264 $213
24% Net income $259 $199 30% Underwriting
gain* $126 $60 110% Net investment income
$239 $230 4% Combined ratio 92.2
96.2 4.0 Catastrophes and PYD 3.9 3.0
(0.9) Combined ratio before catastrophes and PYD 88.4
93.1 4.7 Small Commercial:
Combined ratio before catastrophes and PYD
85.1 87.6 2.5 New business premium $141
$140 1% Policy count retention 83% 84%
(1.0) Middle Market:
Combined ratio before catastrophes and PYD 89.3 97.6
8.3 New business premium $119 $110 8%
Policy count retention 81% 80% 1.0 Written
premiums $1,655 $1,571 5% Standard Commercial
renewal written pricing increases 3% 5% (2.0)
Core earnings in Commercial Lines increased $51 million,
after-tax, or 24%, in second quarter 2015 to $264 million,
after-tax, largely due to an improvement in the combined ratio
before catastrophes and PYD. Net investment income also contributed
to the increase, rising $9 million, or 4%, to $239 million, before
tax. The growth in investment income was due to higher investment
income on LPs.
Commercial Lines underwriting gain rose to $126 million, before
tax, in second quarter 2015 for a 92.2 combined ratio compared with
a second quarter 2014 underwriting gain of $60 million, before tax,
for a 96.2 combined ratio. The increased underwriting gain and
improved combined ratio were principally due to stronger
underwriting results, before catastrophes and PYD. Unfavorable PYD
and current accident year catastrophe losses were slightly higher
than second quarter 2014. Unfavorable PYD in Commercial Lines in
second quarter 2015 totaled $21 million, before tax, compared with
unfavorable PYD of $12 million, before tax, in second quarter
2014.
Second quarter 2015 combined ratio before catastrophes and PYD
improved 4.7 points over second quarter 2014 to 88.4, reflecting
improvement in each of the three business lines. Middle Market had
an 89.3 combined ratio before catastrophes and PYD, while Small
Commercial had an 85.1 combined ratio before catastrophes and PYD.
The improvement in both Small Commercial and Middle Market compared
with second quarter 2014 resulted from continued margin improvement
in workers’ compensation and favorable non-catastrophe weather and
non-weather property experience. Specialty Commercial combined
ratio before catastrophes and PYD improved 2.7 points to 98.8 due
to favorable results in Financial Products and a slight shift in
premium mix toward Bond, which has a lower combined ratio.
Second quarter 2015 written premiums in Commercial Lines grew 5%
over second quarter 2014 to $1,655 million, reflecting continued
renewal written price increases and sustained strong retention in
Small Commercial and Middle Market, which together comprise about
87% of Commercial Lines written premiums. Second quarter 2015
renewal written price increases averaged 3% in Standard Commercial,
including 3% in Small Commercial and 2% in Middle Market, exclusive
of specialty programs and livestock. Policy count retention
remained strong at 83% in Small Commercial and 81% in Middle
Market.
PERSONAL LINES
Second Quarter 2015 Highlights:
- Core earnings were $42 million
reflecting lower catastrophe and non-catastrophe weather losses
compared with second quarter 2014
- Combined ratio before catastrophes and
PYD of 89.1 improved 2.0 points over second quarter 2014
- Written premiums rose 1% over second
quarter 2014, driven by 3% growth in AARP (Direct and Agency)
($ in millions)
Three Months Ended
Jun 302015
Jun 302014
Change Core earnings (losses) $42 $(27)
NM Net income (losses) $41 $(30) NM
Underwriting gain (losses) $8 $(74) NM Net
investment income $34 $31 10% Combined ratio
99.2 107.8 8.6 Catastrophes and PYD
10.0 16.7 6.7 Combined ratio before catastrophes and
PYD 89.1 91.1 2.0 Automobile 96.6
96.0 (0.6) Homeowners 72.6 81.4
8.8 Written premiums $1,009 $1,003 1%
Second quarter 2015 core earnings in Personal Lines were $42
million, after-tax, compared with core losses of $27 million, after
tax, in second quarter 2014 primarily due to better underwriting
results as a result of lower catastrophe and non-catastrophe
weather losses. Personal Lines underwriting gain improved to $8
million, before tax, for a combined ratio of 99.2 in second quarter
2015 compared with underwriting losses of $74 million in second
quarter 2014, for a combined ratio of 107.8. Catastrophe losses
fell to $97 million, before tax, in second quarter 2015 compared
with $161 million, before tax, in second quarter 2014. There was no
PYD in second quarter 2015 compared with favorable $3 million,
before tax, in second quarter 2014. Catastrophes and PYD
represented 10.0 points on the second quarter 2015 combined ratio
versus 16.7 points in second quarter 2014.
Second quarter 2015 combined ratio before catastrophes and PYD
improved 2.0 points compared with second quarter 2014 to 89.1 due
to improved homeowners results. The combined ratio before
catastrophes and PYD for homeowners declined from 81.4 in second
quarter 2014 to 72.6 in second quarter 2015 as a result of improved
frequency and severity of homeowners weather-related losses, lower
fire losses and rate increases over the past year. The combined
ratio before catastrophes and PYD for automobile rose slightly from
96.0 in second quarter 2014 to 96.6 in second quarter 2015 due to
higher automobile liability severity.
Second quarter 2015 Personal Lines written premiums rose 1% over
second quarter 2014 reflecting growth in AARP Direct due to
automobile new business growth, rate increases and stable
retention, partially offset by premium declines in Other Agency.
Renewal written price increases in second quarter 2015 were 6% in
automobile and 8% in homeowners, consistent with the past several
quarters, while premium retention was stable with first quarter
2015 at 87% for automobile and 90% for homeowners. Compared with
second quarter 2014, premium retention was down 1 point for
automobile and down 2 points for homeowners. Underwriting actions
resulted in a 9% decrease in new business premiums to $125 million
in second quarter 2015 compared with second quarter 2014, comprised
of a 7% decline in automobile and 17% in homeowners.
GROUP BENEFITS
Second Quarter 2015 Highlights:
- Core earnings of $56 million increased
8% over second quarter 2014 principally due to higher earned
premiums and a lower expense ratio
- After-tax core earnings margin*
increased to 6.3% from 6.0% in second quarter 2014
- Fully insured ongoing premiums grew 5%
over second quarter 2014, excluding Association-Financial
Institutions (A-FI)
($ in millions)
Three Months Ended
Jun 302015
Jun 302014
Change Core earnings1 $56 $52 8%
Net income $56 $55 2% Fully insured ongoing
premiums, excluding A-FI2 $780 $742 5% Loss
ratio, excluding A-FI 77.6% 77.5% (0.1)
Expense ratio, excluding A-FI 25.0% 25.8% 0.8
Net investment income $95 $95 —% After-tax
core earnings margin* 6.3% 6.0% 0.3
[1] Includes $0 from A-FI in the three months ended June 30,
2015 and June 30, 2014
[2] Fully insured ongoing premiums excludes buyout premiums and
premium equivalents; excludes A-FI premiums of $0 million and $19
million in second quarter 2015 and 2014, respectively
Second quarter 2015 Group Benefits core earnings rose $4
million, after-tax, to $56 million, an 8% increase from $52 million
in second quarter 2014, primarily due to higher earned premiums and
a lower expense ratio compared with second quarter 2014. The
after-tax core earnings margin increased to 6.3% in second quarter
2015 from 6.0% in second quarter 2014.
The second quarter 2015 total loss ratio was 77.6%, a 0.1 point
increase, reflecting a 3.1 point improvement in group disability
and a 3.6 point deterioration in group life compared with second
quarter 2014, excluding A-FI. The improvement in group disability
reflects improved incidence, pricing, and recoveries while the
group life results reflect less favorable mortality compared with
second quarter 2014. The expense ratio, excluding A-FI, improved
0.8 point to 25.0% in second quarter 2015. The A-FI book, which was
in the group life business, is now fully run off and does not
impact 2015 results, although it did impact the group life loss and
expense ratios in 2014.
Second quarter 2015 fully insured ongoing premiums were $780
million, up 5% from second quarter 2014, excluding A-FI, reflecting
increased sales and strong persistency during 2015. Group life
premiums, which comprise 48% of segment premiums, rose 7%,
excluding A-FI, while group disability premiums, which comprise
approximately 46%, rose 3%. Second quarter 2015 fully insured
ongoing sales rose 29% over second quarter 2014 to $58 million,
reflecting sales growth for group disability of 35% to $27 million
and for group life of 17% to $28 million. Sales growth in the
quarter reflects an increase in large accounts.
MUTUAL FUNDS
Second Quarter 2015 Highlights:
- Core earnings rose $1 million over
second quarter 2014 to $22 million
- Mutual Fund net flows, which exclude
Talcott Resolution assets under management (AUM), were $250 million
in the quarter and $779 million for first half 2015
- Solid overall fund performance, with
51%, 60% and 69% of Hartford Mutual Funds outperforming peers on a
1-, 3- and 5-year basis, respectively1
($ in millions)
Three Months Ended
Jun 302015
Jun 302014
Change Core earnings $22 $21 5%
Net income $22 $21 5% Mutual Fund sales
$3,989 $3,910 2% Mutual Fund net flows $250
$(438) NM Mutual Fund AUM $76,251
$74,330 3% Talcott AUM $19,406 $24,529
(21)% Total Mutual Funds segment AUM $95,657 $98,859
(3)%
Second quarter 2015 core earnings for the Mutual Funds segment
of $22 million rose $1 million over second quarter 2014 due to
slightly higher revenues and lower expenses compared with second
quarter 2014.
Total AUM for the segment declined 3% due to the continued
runoff of Talcott Resolution AUM, which decreased 21% over the last
twelve months to $19.4 billion at June 30, 2015 due to the
runoff of the business and the transfer of assets under management
from Mutual Funds segment to the company's asset management group,
Hartford Investment Management Company. Mutual Fund AUM increased
to $76.3 billion at June 30, 2015, from $74.3 billion at
June 30, 2014 primarily due to higher market levels and strong
sales over the period.
During the quarter, Mutual Fund net flows were $250 million,
benefiting from higher sales during the quarter and lower
redemptions compared with second quarter 2014. Overall Mutual Fund
performance remained solid, with 51%, 60% and 69% of funds
outperforming peers on a 1-, 3- and 5-year basis, respectively.
[1] Hartford Mutual Funds only on Morningstar net of fee
basis
TALCOTT RESOLUTION
($ in millions)
Three Months Ended
Jun 302015
Jun 302014
Change Core earnings $171 $101
69% Net income $217 $(504) NM
Variable annuity contract count (in
thousands)
634 721 (12)% Fixed annuity and other contract
count (in thousands) 134 151 (11)%
Talcott Resolution second quarter 2015 core earnings were $171
million, a $70 million, or 69%, increase from second quarter 2014
due to a $48 million reduction in income tax expense related to the
conclusion of the 2007 to 2011 federal tax audit and higher
investment income, principally due to LPs. LP investment income
totaled $47 million, before tax, in Talcott Resolution in second
quarter 2015 compared with $28 million, before tax, in second
quarter 2014.
Variable annuity (VA) and fixed annuity contract counts as of
June 30, 2015, declined 3% and 2%, respectively, from March
31, 2015, and 12% and 11%, respectively, from June 30, 2014.
The decline in contract counts during the quarter reflects normal
surrender activity for VA contracts and an increase in fixed
annuity surrender activity as a result of the increased surrender
value program launched in June 2015.
INVESTMENTS
($ in millions)
Three Months Ended Amounts
presented before tax
Jun 302015
Jun 302014
Change Total investments excluding equity securities,
trading $74,429 $76,227 (2 )% Net investment
income on LPs $94 $53 77 % Net investment
income $796 $768 4 % Net impairment losses,
including mortgage loan loss reserves $(11) $(10)
(10 )% Annualized investment yield1 4.5% 4.3%
0.2 Annualized investment yield on LPs 12.9%
7.4% 5.5 Annualized investment yield,
excluding LPs 4.1% 4.1% —
[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.
Second quarter 2015 net investment income totaled $796 million,
before tax, a 4% increase from second quarter 2014 reflecting
higher investment income on LPs. Investment income on LPs increased
in second quarter 2015 to $94 million, before tax, from $53
million, before tax, in second quarter 2014. Excluding the increase
in LP investment income, net investment income declined
approximately 2% in the quarter due to reinvesting at lower
interest rates and a decrease in invested asset levels due to the
runoff of Talcott Resolution, which were largely offset by higher
income received from make-whole payments on fixed maturities and
prepayment penalties on mortgage loans. New money yields averaged
3.5% in second quarter 2015 versus 3.8% in second quarter 2014.
Annualized investment yield increased to 4.5%, before tax, from
4.3%, before tax, in second quarter 2014 due to LPs. Annualized
investment yield on LPs increased to 12.9%, before tax, compared
with 7.4%, before tax, in second quarter 2014. Annualized
investment yield excluding LPs of 4.1%, before tax, was consistent
with first quarter 2015 and second quarter 2014.
The credit performance of the company's portfolio remained
strong and stable. Net impairment losses in second quarter 2015,
including changes in mortgage loan loss reserves, totaled $11
million, before tax, compared with $10 million, before tax, in
second quarter 2014.
The carrying value of total investments, excluding equity
securities, trading, declined to $74.4 billion at June 30,
2015 compared with $76.2 billion at June 30, 2014. The decline
in total investments reflects the decline in Talcott Resolution as
well as the execution of the company's capital management plan over
the last year.
STOCKHOLDERS’ EQUITY
($ in millions)
As of
Jun 30,2015
Dec 312014
Change Stockholders' equity $18,227
$18,720 (3)% Stockholders' equity (ex. AOCI) $18,039
$17,792 1% Book value per diluted share $42.86
$42.84 —% Book value per diluted share (ex. AOCI)
$42.41 $40.71 4% Weighted average common
shares outstanding 418.7 429.6 (3)% Weighted
average diluted common shares outstanding 428.1 442.6
(3)%
The Hartford’s stockholders’ equity was $18.2 billion as of June
30, 2015, a 3% decrease from $18.7 billion as of Dec. 31, 2014,
primarily due to a decrease in accumulated other comprehensive
income (AOCI) of $740 million, common share repurchases of $500
million and common dividends of $150 million during the first half
of 2015, partially offset by net income of $880 million. Excluding
AOCI, stockholders' equity was $18.0 billion as of June 30, 2015, a
1% increase compared with Dec. 31, 2014.
Weighted average common shares outstanding and weighted average
diluted common shares outstanding both decreased by 3% to 418.7
million and 428.1 million, respectively, at June 30, 2015 from Dec.
31, 2014 as a result of the company's repurchase of 12.1 million
common shares for $500 million, at an average price of $41.29 per
share.
Under the capital management plan announced in 2014 and
increased today, the company has $4.375 billion of equity
repurchase authorization for the period Jan. 1, 2014, through Dec.
31, 2016. As of July 24, 2015, the company has spent $2.377 billion
for equity repurchases under this program, including $81 million
since June 30, 2015, leaving approximately $2.0 billion for equity
repurchases through Dec. 31, 2016.
Book value per diluted common share was $42.86 as of June 30,
2015, stable with Dec. 31, 2014, as the 3% decline in stockholders'
equity due to higher interest rates was offset by the impact of
share repurchases on weighted average diluted common shares
outstanding. Excluding AOCI, book value per diluted common share at
June 30, 2015, rose 4% to $42.41 from $40.71 at Dec. 31, 2014, due
to the 1% increase in stockholders' equity, excluding AOCI, and the
3% reduction in weighted average diluted common shares outstanding
due to the company's equity repurchase program.
CONFERENCE CALL
The Hartford will discuss its second quarter 2015 financial
results in a webcast on Tuesday, July 28, 2015, at 9 a.m. EDT. The
webcast can be accessed live or as a replay through the investor
relations section of The Hartford's website at
http://ir.thehartford.com.
More detailed financial information can be found in The
Hartford's Quarterly Report on Form 10-Q, the Investor Financial
Supplement for June 30, 2015, and the Second Quarter 2015
Financial Results Presentation, all of which are available at
http://ir.thehartford.com.
ABOUT THE HARTFORD
With more than 200 years of expertise, The Hartford (NYSE:HIG)
is a leader in property and casualty insurance, group benefits and
mutual funds. The company is widely recognized for its service
excellence, sustainability practices, trust and integrity. More
information on the company and its financial performance is
available at www.thehartford.com.
From time to time, The Hartford uses its website to disseminate
material company information. Financial and other important
information regarding The Hartford is routinely accessible through
and posted on our website at http://ir.thehartford.com. In
addition, you may automatically receive email alerts and other
information about The Hartford when you enroll your email address
by visiting the “Email Alerts” section at
http://ir.thehartford.com.
HIG-F
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATING INCOME STATEMENTS Three Months Ended June
30, 2015
($ in millions)
Property &Casualty
GroupBenefits
MutualFunds
TalcottResolution
Corporate Consolidated Earned premiums
$ 2,589 $ 780 $ — $ 22 $ — $
3,391 Fee income — 16 184 266 3 469 Net investment income 307 95 —
390 4 796 Other revenues 20 — — — — 20 Net realized capital gains
(losses) (6 ) 2 — 11
2 9
Total revenues
2,910 893 184 689 9 4,685
Benefits, losses, and loss adjustment expenses 1,884 618 — 310 —
2,812 Amortization of deferred policy acquisition costs 327 8 6 50
— 391 Insurance operating costs and other expenses 443 191 144 119
11 908 Interest expense — — — — 89 89 Loss on extinguishment of
debt — — — — 21 21 Net reinsurance gain on dispositions — — — (8 )
— (8 ) Restructuring and other costs — —
— — 2 2
Total benefits and expenses 2,654 817
150 471 123 4,215 Income (loss) from
continuing operations, before income taxes 256 76
34 218 (114 ) 470 Income tax
expense (benefit) 67 20 12
1 (43 ) 57
Net income
(loss) 189 56 22 217 (71
) 413 Less: Unlock benefit, after-tax — — — 31 — 31
Less: Net realized capital gains (losses), after-tax and DAC,
excluded from core earnings (4 ) — — 10 (2 ) 4 Less: Restructuring
and other costs, after-tax — — — — (2 ) (2 ) Less: Loss on
extinguishment of debt, after-tax — — — — (14 ) (14 ) Less: Net
reinsurance gain on dispositions, after-tax —
— — 5 — 5
Core earnings (losses) $ 193 $
56 $ 22 $ 171 $
(53 ) $ 389 THE
HARTFORD FINANCIAL SERVICES GROUP, INC. PROPERTY &
CASUALTY CONSOLIDATING INCOME STATEMENTS Three Months
Ended June 30, 2015
($ in millions)
CommercialLines
PersonalLines
P&COther
Property &Casualty
Written premiums $ 1,655 $ 1,009 $ 3 $ 2,667 Change in unearned
premium reserve 32 43 3
78
Earned premiums 1,623 966
— 2,589 Losses and loss adjustment expenses Current
accident year before catastrophes 909 616 — 1,525 Current accident
year catastrophes 42 97 — 139 Prior year development 21
— 199 220
Total
losses and loss adjustment expenses 972 713
199 1,884 Amortization of DAC 237 90 — 327
Underwriting expenses 284 155 7 446 Dividends to policyholders
4 — — 4
Underwriting gain (loss) 126 8 (206
) (72 ) Net investment income 239 34 34 307
Net realized capital gains (losses) (7 ) (1 ) 2 (6 ) Net servicing
and other income 6 20 1
27
Income (loss) from continuing operations before
income taxes 364 61 (169 )
256 Income tax expense (benefit) 105 20
(58 ) 67
Net income (loss) 259
41 (111 ) 189 Less: Net realized capital gains (losses), after-tax
and DAC, excluded from core earnings (5 ) (1 )
2 (4 )
Core earnings (losses) $
264 $ 42 $ (113 )
$ 193 THE HARTFORD FINANCIAL
SERVICES GROUP, INC. CONSOLIDATING INCOME STATEMENTS
Three Months Ended June 30, 2014
($ in millions)
Property &Casualty
GroupBenefits
MutualFunds
TalcottResolution
Corporate
Consolidated Earned premiums $ 2,505 $ 761 $ — $ 53 $
— $ 3,319 Fee income — 16 183 299 4 502 Net investment income 292
95 — 376 5 768 Other revenues 31 — — — — 31 Net realized capital
gains (losses) (25 ) 6 —
1 14 (4 )
Total revenues
2,803 878 183 729 23
4,616 Benefits, losses, and loss adjustment expenses 2,008
601 — 414 — 3,023 Amortization of deferred policy acquisition costs
316 7 7 42 — 372 Insurance operating costs and other expenses 465
195 144 145 20 969 Interest expense — — — — 94 94 Restructuring and
other costs — — —
— 8 8
Total benefits and
expenses 2,789 803 151 601
122 4,466 Income (loss) from continuing operations
before income taxes 14 75 32 128
(99 ) 150 Income tax expense (benefit)
(11 ) 20 11 15 (35
) —
Income (loss) from continuing operations,
after tax 25 55 21 113 (64
) 150 Loss from discontinued operations, after-tax
— — — (617 )
— (617 )
Net income (loss) 25
55 21 (504 ) (64 )
(467 ) Less: Unlock benefit, after-tax — — — 15 — 15
Less: Net realized capital gains (losses) and other, after-tax and
DAC, excluded from core earnings (15 ) 3 — (3 ) 11 (4 ) Less:
Restructuring and other costs, after-tax — — — — (5 ) (5 ) Less:
Loss from discontinued operations, after-tax —
— — (617 ) — (617
)
Core earnings (losses) $ 40 $
52 $ 21 $ 101 $
(70 ) $ 144 THE
HARTFORD FINANCIAL SERVICES GROUP, INC. PROPERTY &
CASUALTY CONSOLIDATING INCOME STATEMENTS Three Months
Ended June 30, 2014
($ in millions)
CommercialLines
PersonalLines
P&COther
Property &Casualty
Written premiums $ 1,571 $ 1,003 $ — $ 2,574 Change in unearned
premium reserve 12 57 —
69
Earned premiums 1,559 946
— 2,505 Losses and loss adjustment expenses Current
accident year before catastrophes 934 629 — 1,563 Current accident
year catastrophes 35 161 — 196 Prior year development 12
(3 ) 240 249
Total
losses and loss adjustment expenses 981 787
240 2,008 Amortization of DAC 230 86 — 316
Underwriting expenses 285 147 7 439 Dividends to policyholders
3 — — 3
Underwriting gain (loss) 60 (74 )
(247 ) (261 ) Net investment income 230
31 31 292 Net realized capital gains (losses) (24 ) (3 ) 2 (25 )
Net servicing and other income (expense) 10 (4
) 2 8
Income (loss) from continuing
operations before income taxes 276 (50 )
(212 ) 14 Income tax expense (benefit)
77 (20 ) (68 ) (11 )
Net income
(loss) 199 (30 ) (144 ) 25 Less: Net realized capital gains
(losses), after-tax and DAC, excluded from core earnings (14
) (3 ) 2 (15 )
Core earnings
(losses) $ 213 $ (27 )
$ (146 ) $ 40
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 second 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
Jun 302015
Dec 312014
Change Book value per diluted common share, including
AOCI $42.86 $42.84 —% Less: Per diluted share impact
of AOCI $0.45 $2.13 (79)%
Book value per
diluted common share, excluding AOCI $42.41
$40.71 4%
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 June 30, 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 June 30,
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 June 30, 2015 and 2014 is provided in the table
below.
Three Months Ended
Jun 302015
Jun 302014
Change PER SHARE DATA Diluted earnings
(losses) per common share:
Core earnings available to common
shareholders $0.91 $0.31 194% Add: Unlock
benefit, after-tax 0.07 0.03 133% Add: Net realized capital losses,
after-tax and DAC, excluded from core earnings — (0.01) (100)% Add:
Restructuring and other costs, after-tax — (0.01) (100)% Add: Loss
on extinguishment of debt, after-tax (0.03) — —% Add: Net
reinsurance gain on dispositions, after-tax 0.01 — —% Add: Loss
from discontinued operations, after-tax — (1.32)
(100)%
Net income (loss) available to common
shareholders $0.96 $(1.00)
NM
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
June 30, 2015 and 2014, is set forth below.
Three Months Ended June 30, After-tax margin
2015 2014 Change
After-tax margin (excluding buyouts) 6.3% 6.3% —
Effect of net capital realized gains (losses), net of tax on
after-tax margin —% 0.3% (0.3)
After-tax core earnings margin
(excluding buyouts) 6.3% 6.0%
0.3
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 June 30, 2015 and 2014, is set forth
below.
Three Months Ended
Jun 302015
Jun 302014
Commercial Lines Net income $259 $199 Add: Income tax
expense 105 77 Less: Other expenses 2 4 Less: Net realized capital
losses (7) (24) Less: Net investment income 239 230 Less: Net
servicing income 4 6
Underwriting gain
$126 $60 Personal Lines Net income
(loss) $41 $(30) Add: Income tax expense (benefit) 20 (20) Less:
Other expenses (income) 18 (4) Less: Net realized capital losses
(1) (3) Less: Net investment income 34 31 Less: Net servicing
income 2 —
Underwriting gain (loss) $8
$(74)
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
runoff annuity block; 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 expense reduction initiatives and other
actions, which may include acquisitions, divestitures or
restructurings; the risks, challenges and uncertainties associated
with our capital management plan, including as a result of changes
in our financial position and earnings, share price, capital
position, legal restrictions, other investment opportunities, and
other factors; 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 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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150727006264/en/
The HartfordMedia ContactsMichelle Loxton,
860-547-7413michelle.loxton@thehartford.comorMatthew Sturdevant,
860-547-8664matthew.sturdevant@thehartford.comorInvestor
ContactsSabra Purtill, CFA,
860-547-8691sabra.purtill@thehartford.comorSean Rourke,
860-547-5688sean.rourke@thehartford.com
Hartford Financial Servi... (NYSE:HIG)
Historical Stock Chart
From Mar 2024 to Apr 2024
Hartford Financial Servi... (NYSE:HIG)
Historical Stock Chart
From Apr 2023 to Apr 2024