- Income from continuing operations, net of tax, available to common stockholders rose to $625 million ($1.71 per diluted share) from $428 million ($1.18 per diluted share) in first quarter 2018, in part due to net realized capital gains including unrealized gains on equity securities in first quarter 2019
- Core earnings* of $507 million rose 10% from $461 million in first quarter 2018 and core earnings per diluted share* of $1.39 rose 9% from $1.27 due to higher Group Benefits core earnings and lower Corporate core losses, partially offset by lower Property and Casualty (P&C) and Hartford Funds core earnings
- Book value per diluted share of $38.36 rose 9% from Dec. 31, 2018; book value per diluted share excluding accumulated other comprehensive income (AOCI)* was $40.79, up 4%
- Net income ROE for the trailing 12-month period ended March 31, 2019, which included high catastrophe losses in the second half of 2018, was 13.5% and core earnings ROE for the same period was 11.5%
- In addition to first quarter results, the company announced that it will purchase an aggregate excess of loss reinsurance treaty that will provide $300 million of coverage for unfavorable prior year loss development at The Navigators Group, Inc. ("Navigators") for a premium of approximately $72 million, after tax, to be incurred in the quarter the acquisition closes
* Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP); definitions of non-GAAP measures and reconciliations to their closest GAAP measures can be found in this news release under the heading Discussion of Non-GAAP Financial Measures
HARTFORD, Conn.--(BUSINESS WIRE)--The Hartford (NYSE: HIG) reported first quarter 2019 income from
continuing operations, net of tax, available to common stockholders of
$625 million, a 46% increase from $428 million in first quarter 2018. On
a per diluted share basis, first quarter 2019 income from continuing
operations, net of tax, available to common stockholders was $1.71 per
diluted share compared with $1.18 per diluted share in first
quarter 2018.
The growth in income from continuing operations, net of tax, available
to common stockholders was principally due to a change from net realized
capital losses in 2018 to net realized capital gains in 2019, primarily
driven by appreciation in the value of equity securities from higher
equity market levels. Net realized capital gains in first quarter 2019
were $163 million, before tax ($128 million, after tax), compared with
net realized capital losses of $30 million, before tax ($23 million,
after tax), in first quarter 2018. The impact of net realized capital
gains on net income was partially offset by no income from discontinued
operations in first quarter 2019, compared with $169 million, after tax,
of income from discontinued operations in first quarter 2018.
Core earnings of $507 million in first quarter 2019 increased 10% from
$461 million in first quarter 2018, reflecting higher Group Benefits
core earnings and lower Corporate core losses offset by lower P&C and
Hartford Funds core earnings. The growth in Group Benefits core earnings
was driven by lower loss and expense ratios, while the reduction in
Corporate core losses reflects income from the company's retained
interest in the life and annuity business sold in 2018, higher net
investment income and lower interest expense. P&C core earnings in both
Commercial Lines and Personal Lines decreased due primarily to higher
expenses and lower favorable prior accident year reserve development
(PYD). Core earnings per diluted share of $1.39 was up 9% from $1.27 per
diluted share, in first quarter 2018.
“First quarter results were strong, and all of The Hartford’s businesses
performed well, making meaningful contributions to financial results and
the execution of strategic goals,” stated Chris Swift, The Hartford’s
Chairman and CEO. “Margins remain in line or better than our
expectations, with the increase in the property and casualty expense
ratio due to planned investments and marketing spend. In addition, our
capital generation and balance sheet remain strong, supporting our plans
to begin share repurchases in the second quarter under the $1.0 billion
authorization announced this February.”
The Hartford’s President Doug Elliot commented, “This was another solid
quarter across the board. Group Benefits earnings were excellent with
strong disability results and very good sales in the first quarter.
Commercial Lines earnings were in line with expectations, with solid top
line growth. Personal Lines earnings were strong with new business
premium growth driven by increased marketing initiatives and improved
conversion rates. We are looking forward to closing the Navigators
acquisition and will hit the ground running day one with our combined
organizations."
The Hartford also announced today that, subject to regulatory approval
and to be effective after the closing of the acquisition of Navigators,
it has entered into a definitive agreement with National Indemnity
Company (NICO), a subsidiary of Berkshire Hathaway Inc., for an
aggregate excess of loss reinsurance treaty for Navigators'
subsidiaries. The treaty provides up to $300 million of coverage for
potential adverse PYD in excess of $100 million above Navigators’ Dec.
31, 2018 loss reserves of $1.8 billion, subject to limited exclusions.
The premium paid for the reinsurance treaty is approximately $91
million, before tax, or $72 million, after tax, and will be recorded in
the company's net income, but not in core earnings, in the quarter the
transaction closes.
“As we discussed at the time of the announcement, we will update our
review of Navigators' reserves after closing, using the most recent
information available and applying our own judgments and reserve
methodologies," stated The Hartford’s Chief Financial Officer Beth
Costello. “In order to provide greater certainty about the impact this
may have to The Hartford, we decided to purchase from NICO an adverse
loss development cover for Navigators' reserves."
March 31, 2019 book value per diluted share was $38.36, up 9% from
$35.06 as of Dec. 31 2018, due to a 10% increase in common stockholders'
equity resulting primarily from an increase in AOCI over the three month
period, as well as net income in excess of stockholder dividends. Book
value per diluted share (excluding AOCI) of $40.79 as of March 31, 2019
increased 4% from $39.40 at Dec. 31, 2018. The increase in stockholders'
equity, excluding AOCI, was primarily due to higher net income available
to common stockholders, which was well in excess of common dividends
paid. The company paid $109 million in common stock dividends during
first quarter 2019, and did not repurchase any common stock during the
quarter, leaving $1.0 billion remaining under its share repurchase
authorization, which expires Dec. 31, 2020.
Net income return on equity (ROE)1 was 13.5% in first quarter
2019 compared with net loss ROE of 19.3% in first quarter 2018. The
first quarter 2018 net loss ROE was the result of the trailing 12-month
net loss of $2,912 million due to several large losses including the
fourth quarter 2017 loss on sale of Talcott Resolution, the fourth
quarter 2017 charge related to U.S. corporate income tax reform and the
second quarter 2017 pension settlement charge. Core earnings ROE* in
first quarter 2019 was 11.5%, an increase of 3.7 points from 7.8% in
first quarter 2018 due to higher trailing 12-month core earnings, which
increased 37% to $1,621 million in first quarter 2019 from $1,187
million in first quarter 2018.
[1] Net income ROE represents net income (loss) available to common
stockholders ROE
FINANCIAL RESULTS SUMMARY
|
($ in millions except per share data)
|
|
|
|
Three Months Ended
|
|
|
|
|
Mar 31
2019
|
|
|
Mar 31
2018
|
|
|
Change¹
|
|
Net income by segment:
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Lines
|
|
|
|
$363
|
|
|
$298
|
|
|
22%
|
|
Personal Lines
|
|
|
|
96
|
|
|
89
|
|
|
8%
|
|
P&C Other Operations
|
|
|
|
23
|
|
|
17
|
|
|
35%
|
|
Property & Casualty
|
|
|
|
482
|
|
|
404
|
|
|
19%
|
|
Group Benefits
|
|
|
|
118
|
|
|
54
|
|
|
119%
|
|
Hartford Funds
|
|
|
|
30
|
|
|
34
|
|
|
(12)%
|
|
Sub-total
|
|
|
|
630
|
|
|
492
|
|
|
28%
|
|
Corporate
|
|
|
|
—
|
|
|
105
|
|
|
(100)%
|
|
Net income
|
|
|
|
$630
|
|
|
$597
|
|
|
6%
|
|
Less: Income from discontinued operations, net of tax
|
|
|
|
—
|
|
|
169
|
|
|
(100)%
|
|
Income from continuing operations, net of tax
|
|
|
|
$630
|
|
|
$428
|
|
|
47%
|
|
Less: Net realized capital gains (losses), excluded from core
earnings, before tax
|
|
|
|
160
|
|
|
(30)
|
|
|
NM
|
|
Less: Integration and transaction costs associated with acquired
business, before tax
|
|
|
|
(10)
|
|
|
(12)
|
|
|
17%
|
|
Less: Income tax benefit (expense), including amounts related to
before tax items excluded from core earnings
|
|
|
|
(32)
|
|
|
9
|
|
|
NM
|
|
Less: Preferred stock dividends
|
|
|
|
5
|
|
|
—
|
|
|
NM
|
|
Core earnings
|
|
|
|
$507
|
|
|
$461
|
|
|
10%
|
|
Net income available to common stockholders
|
|
|
|
$625
|
|
|
$597
|
|
|
5%
|
|
Weighted average diluted common shares outstanding
|
|
|
|
364.7
|
|
|
363.9
|
|
|
—%
|
|
Income from continuing operations, net of tax, available to common
stockholders per diluted share2
|
|
|
|
$1.71
|
|
|
$1.18
|
|
|
45%
|
|
Net income available to common stockholders per diluted share2
|
|
|
|
$1.71
|
|
|
$1.64
|
|
|
4%
|
|
Core earnings per diluted share2
|
|
|
|
$1.39
|
|
|
$1.27
|
|
|
9%
|
|
Select financial measures:
|
|
|
|
|
|
|
|
|
|
|
|
Common shares outstanding and dilutive potential common shares
|
|
|
|
365.1
|
|
|
364.5
|
|
|
—%
|
|
Book value per diluted share
|
|
|
|
$38.36
|
|
|
$36.06
|
|
|
6%
|
|
Book value per diluted share (excluding AOCI)*
|
|
|
|
$40.79
|
|
|
$36.71
|
|
|
11%
|
|
Net income (loss) available to common stockholders ROE3,
last 12-months
|
|
|
|
13.5%
|
|
|
(19.3)%
|
|
|
32.8
|
|
Core earnings ROE3, last 12-months*
|
|
|
|
11.5%
|
|
|
7.8%
|
|
|
3.7
|
[1] The Hartford defines increases or decreases greater than
or equal to 200%, or changes from a net gain to a net loss position, or
vice versa, as "NM" or not meaningful
[2] Includes
dilutive potential common shares; for income (loss) from continuing
operations, net of tax, available to common stockholders per diluted
share, the numerator is income from continuing operations, after tax,
less preferred dividends
[3] Return on equity (ROE)
is calculated based on last 12-months net income available to common
stockholders and core earnings, respectively; for net income ROE, the
denominator is stockholders’ equity including AOCI; for core earnings
ROE, the denominator is stockholders’ equity excluding AOCI
|
|
|
|
|
|
|
FIRST QUARTER 2019 SEGMENT FINANCIAL RESULTS SUMMARY
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
($ in millions)
|
|
|
|
Mar 31
2019
|
|
|
Mar 31
2018
|
|
|
Change¹
|
|
Core earnings (losses)
|
|
|
|
|
|
|
|
|
|
|
|
P&C segments:
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Lines
|
|
|
|
$274
|
|
|
$302
|
|
|
(9)%
|
|
Personal Lines
|
|
|
|
82
|
|
|
89
|
|
|
(8)%
|
|
P&C Other Operations
|
|
|
|
16
|
|
|
17
|
|
|
(6)%
|
|
Property & Casualty
|
|
|
|
372
|
|
|
408
|
|
|
(9)%
|
|
Group Benefits
|
|
|
|
122
|
|
|
85
|
|
|
44%
|
|
Hartford Funds
|
|
|
|
28
|
|
|
34
|
|
|
(18)%
|
|
Sub-total
|
|
|
|
522
|
|
|
527
|
|
|
(1)%
|
|
Corporate
|
|
|
|
(15)
|
|
|
(66)
|
|
|
77%
|
|
Total
|
|
|
|
$507
|
|
|
$461
|
|
|
10%
|
|
Select business metrics:
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Lines
|
|
|
|
|
|
|
|
|
|
|
|
Combined ratio
|
|
|
|
96.1
|
|
|
93.3
|
|
|
2.8
|
|
Impact of catastrophes and PYD on combined ratio
|
|
|
|
3.3
|
|
|
2.9
|
|
|
0.4
|
|
Underlying combined ratio*
|
|
|
|
92.7
|
|
|
90.4
|
|
|
2.3
|
|
Personal Lines
|
|
|
|
|
|
|
|
|
|
|
|
Combined ratio
|
|
|
|
93.2
|
|
|
92.2
|
|
|
1.0
|
|
Impact of catastrophes and PYD on combined ratio
|
|
|
|
4.2
|
|
|
2.5
|
|
|
1.7
|
|
Underlying combined ratio
|
|
|
|
89.1
|
|
|
89.8
|
|
|
(0.7)
|
|
Group Benefits
|
|
|
|
|
|
|
|
|
|
|
|
Loss ratio
|
|
|
|
74.7%
|
|
|
77.4%
|
|
|
(2.7)
|
|
Expense ratio
|
|
|
|
23.4%
|
|
|
24.0%
|
|
|
(0.6)
|
|
Net income margin
|
|
|
|
7.7%
|
|
|
3.6%
|
|
|
4.1
|
|
Core earnings margin*
|
|
|
|
8.0%
|
|
|
5.6%
|
|
|
2.4
|
|
Hartford Funds
|
|
|
|
|
|
|
|
|
|
|
|
Mutual fund and exchange-traded products (ETP) net flows
|
|
|
|
$874
|
|
|
$678
|
|
|
29%
|
|
Total Hartford Funds assets under management (AUM)
|
|
|
|
$117,589
|
|
|
$115,497
|
|
|
2%
|
Commercial Lines
-
Commercial Lines written premiums of $1.9 billion were up 5% from
first quarter 2018 with increases from all three businesses, while
earned premiums rose 4% to $1.8 billion from $1.7 billion in first
quarter 2018
-
Small Commercial written premiums increased 4% from first quarter
2018 driven by 11% growth in new business and higher retention.
The Foremost renewal rights agreement that was effective in July
2018 contributed to strong growth in new business
-
Middle Market written premiums increased 7% from first quarter
2018 due to higher renewal premium in most lines driven by renewal
written price increases and higher retention
-
Specialty Commercial written premiums were up 10% compared with
first quarter 2018 primarily resulting from increases in bond and
financial products
-
Commercial Lines net income of $363 million increased 22% from $298
million in first quarter 2018 primarily due to net realized capital
gains of $91 million, after tax, including unrealized gains on equity
securities in first quarter 2019 compared with net realized capital
losses of $6 million, after tax in first quarter 2018
-
Core earnings of $274 million decreased 9% from $302 million in first
quarter 2018 due to a lower underwriting gain*, while net investment
income was relatively flat year-over-year
-
The underwriting gain of $70 million decreased from $114 million
in first quarter 2018 principally due to the impact of higher
current accident year losses and loss adjustment expenses, higher
underwriting expenses and lower net favorable PYD, offset in part
by the effect of higher earned premiums. Current accident year
catastrophe losses of $70 million, before tax, were essentially
flat compared to $69 million, before tax, in first quarter 2018
-
The underlying underwriting gain* of $130 million decreased 21%
from $164 million in first quarter 2018 due to lower margins on
workers' compensation and higher underwriting expenses, consistent
with expectations, and higher property losses, partially offset by
the effect of higher earned premiums
-
Net investment income, before tax, was $259 million, relatively
flat with first quarter 2018, as higher investment yields were
offset by lower limited partnerships and other alternative
investments (LPs)
-
The combined ratio of 96.1 was 2.8 points higher than 93.3 in first
quarter 2018 primarily due to a 2.3 point increase in the underlying
combined ratio and lower net favorable PYD by 0.5 point; current
accident year catastrophe losses were largely consistent with the
prior year period at 3.9 points in first quarter 2019 and 4.0 points
in first quarter 2018. The combined ratios for Small Commercial and
Middle Market increased by 2.6 points and 4.7 points, respectively,
while the combined ratio for Specialty Commercial decreased by 2.9
points
-
The underlying combined ratio of 92.7 was 2.3 points higher than
first quarter 2018, reflecting a 1.6 point increase in the current
accident year loss and loss adjustment expense ratio before
catastrophes and a 0.6 point increase in the expense ratio
-
The increase in current accident year loss and loss adjustment
expense ratio before catastrophes was principally due to higher
loss ratios in workers' compensation and higher property losses
-
The increase in the expense ratio reflected higher operating
expenses consistent with the company's digital and technology
initiatives, partially offset by reductions in estimated premium
taxes and state assessments
-
Small Commercial underlying combined ratio increased by 1.6 points
to 89.1 driven by higher underwriting expenses and a higher
workers' compensation loss ratio
-
Middle Market underlying combined ratio rose by 4.5 points to 96.7
principally due to higher property and workers' compensation loss
ratios and a higher underwriting expense ratio
-
Specialty Commercial underlying combined ratio of 96.2 was 1.3
points better than first quarter 2018 primarily due to a lower
expense ratio
Personal Lines
-
Personal Lines written premiums of $771 million declined 4% from first
quarter 2018 as strong new business premium growth, renewal written
price increases, and improved retention rates did not fully offset the
loss of premium from non-renewals. In first quarter 2019, new business
premium of $72 million rose $26 million, or 57%, over first quarter
2018, reflecting the impact of the company's increased marketing
efforts over the past year. Premium retention improved for auto to 87%
from 85% in first quarter 2019 while homeowners' premium retention was
relatively flat at 89%
-
Personal Lines net income of $96 million increased 8% from $89 million
in first quarter 2018 due to net realized capital gains of $15
million, after tax, in first quarter 2019 compared with no net
realized capital gains or losses, after tax, in first quarter 2018
-
Core earnings of $82 million were down 8% from $89 million in first
quarter 2018 principally due to a $13 million, before tax, decrease in
the underwriting gain that was driven by a 7% decline in earned
premiums and a 1.0 point increase in the combined ratio. The
underlying underwriting gain was $87 million, essentially flat with
first quarter 2018
-
The combined ratio of 93.2 increased from 92.2 in first quarter
2018 primarily due to a 1.4 points decline in net favorable PYD
and a 0.3 point increase in the current accident year catastrophe
loss ratio
-
The underlying combined ratio of 89.1 was 0.7 point better than
first quarter 2018, as a 2.6 point increase in the expense ratio
largely due to planned marketing and sales expenses was more than
offset by a 3.3 point improvement in the current accident year
loss and loss adjustment expense ratio before catastrophes,
reflecting improvement in both auto and homeowners
-
The auto combined ratio of 93.1 was flat with first quarter 2018 as a
higher expense ratio and lower net favorable PYD were offset by lower
current accident year losses. The auto underlying combined ratio of
93.6 was 0.6 points better than in first quarter 2018 due to earned
pricing increases in excess of loss cost trends
-
The homeowners combined ratio rose 3.3 points to 93.1 from 89.8 in
first quarter 2018 primarily due to a 3.2 point change in PYD with
first quarter 2019 net unfavorable PYD of 2.1 points compared with net
favorable PYD of 1.1 points in first quarter 2018. The homeowners
underlying combined ratio was 78.4, a 0.5 point improvement over first
quarter 2018 primarily due to earned pricing increases and lower fire,
water and weather-related losses, offset in part by a higher expense
ratio
Group Benefits
-
Fully insured ongoing premiums, excluding buyouts, of $1.4 billion
were flat with first quarter 2018 due to lower sales, offset by strong
persistency
-
Fully insured ongoing sales, excluding buyouts, of $407 million
were down 10% from $454 million in first quarter 2018, which
included significant new sales from the New York Paid Family Leave
product
-
Group Benefits net income of $118 million grew significantly from $54
million in first quarter 2018 due to a $37 million increase in core
earnings and a change to net realized capital gains of $3 million,
after tax, in first quarter 2019 from net realized capital losses of
$20 million, after tax, in first quarter 2018
-
The net income margin rose to 7.7% from 3.6% in first quarter 2018
as a result of the increase in net income
-
Core earnings were $122 million, up $37 million or 44%, from $85
million in first quarter 2018 primarily due to lower disability losses
and lower expenses
-
The core earnings margin was 8.0% compared with 5.6% in first
quarter 2018
-
The total loss ratio of 74.7% improved 2.7 points from first quarter
2018 due to a significant reduction in the group disability loss
ratio, which was partially offset by a slight increase in the group
life loss ratio
-
The 5.3 point decrease in the group disability loss ratio from
first quarter 2018 was due primarily to continued favorable
incidence trends on current and prior incurral years and, to a
lesser extent, strong recoveries driving favorable development on
prior incurral year reserves
-
The 0.4 point increase in the group life loss ratio from first
quarter 2018 was due to higher mortality experience, partially
offset by favorable prior incurral year development on group life
premium waiver
-
The expense ratio of 23.4% decreased 0.6 point from first quarter 2018
primarily driven by lower state taxes and assessments and lower
intangible asset amortization
Hartford Funds
-
Hartford Funds reported net income of $30 million and core earnings of
$28 million, down from net income and core earnings of $34 million in
first quarter 2018 primarily due to lower fee income resulting from a
4% decrease in average daily assets under management (AUM) compared
with first quarter 2018
-
Hartford Funds AUM at March 31, 2019, rose to $118 billion, up 2% from
March 31, 2018 primarily due to higher market values in first quarter
2019, offset by decreases in Talcott Resolution life and annuity
separate account AUM. Hartford Funds AUM rose 12% from Dec. 31, 2018,
due to strong equity market performance and positive net flows
-
Mutual fund and ETP net inflows totaled $0.9 billion in first
quarter 2019, compared with net inflows of $0.7 billion in first
quarter 2018
Corporate
-
Net loss available to common stockholders was $5 million in first
quarter 2019 compared with net income available to common stockholders
of $105 million in first quarter 2018, which included $169 million of
income from discontinued operations, net of tax
-
Corporate core losses declined $51 million, after tax, to $15 million
from $66 million in first quarter 2018 due to an increase in other
revenue, higher net investment income and lower interest expense
-
Other revenue was $34 million in first quarter 2019 as a result of
$28 million, before tax, of income related to the company's 9.7%
equity ownership in Hopmeadow Holdings, the acquirer of Talcott
Resolution
-
Net investment income of $24 million, before tax, increased
significantly from $7 million, before tax, in first quarter 2018
due to higher average invested assets, including proceeds from the
sale of Talcott Resolution, and higher short-term interest rates
|
|
|
|
|
|
|
SELECT INVESTMENT INCOME AND PORTFOLIO DATA
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions)
|
|
|
|
Three Months Ended
|
|
|
|
|
Mar 31
2019
|
|
|
Mar 31
2018
|
|
|
Change
|
|
Net investment income
|
|
|
|
$470
|
|
|
$451
|
|
|
4%
|
|
Annualized investment yield, before tax
|
|
|
|
4.1%
|
|
|
4.2%
|
|
|
(0.1)
|
|
Annualized investment yield, before tax, excluding LPs*
|
|
|
|
3.7%
|
|
|
3.7%
|
|
|
—
|
|
Annualized LP yield, before tax
|
|
|
|
13.4%
|
|
|
18.6%
|
|
|
(5.2)
|
|
Annualized investment yield, after tax
|
|
|
|
3.4%
|
|
|
3.5%
|
|
|
(0.1)
|
|
P&C net investment income
|
|
|
|
$323
|
|
|
$322
|
|
|
—%
|
|
P&C annualized investment yield, before tax
|
|
|
|
4.2%
|
|
|
4.3%
|
|
|
(0.1)
|
|
P&C annualized investment yield, before tax, excluding LPs*
|
|
|
|
3.8%
|
|
|
3.7%
|
|
|
0.1
|
|
P&C annualized investment yield, after tax
|
|
|
|
3.6%
|
|
|
3.5%
|
|
|
0.1
|
|
Group Benefits net investment income
|
|
|
|
$121
|
|
|
$121
|
|
|
—%
|
|
Group Benefits annualized investment yield, before tax
|
|
|
|
4.2%
|
|
|
4.3%
|
|
|
(0.1)
|
|
Group Benefits annualized investment yield, before tax, excluding
LPs*
|
|
|
|
3.9%
|
|
|
3.8%
|
|
|
0.1
|
|
Group Benefits annualized investment yield, after tax
|
|
|
|
3.4%
|
|
|
3.5%
|
|
|
(0.1)
|
First quarter 2019 consolidated net investment income rose 4% to $470
million, before tax, from $451 million, before tax, in first quarter
2018. The growth was due to a higher level of invested assets in
Corporate and P&C, in addition to reinvestment rates above the sales and
maturity yield over the past year and higher short-term interest rates.
These factors were partially offset by lower income from LPs as first
quarter 2019 investment income from LPs was $56 million, before tax,
down 23% from $73 million, before tax, in first quarter 2018. Reflecting
a generally benign credit environment, net impairment losses were $2
million, before tax, in the quarter, compared with no impairment losses
in first quarter 2018.
The annualized investment yield, before tax, was 4.1% for first quarter
2019, down slightly from 4.2% in first quarter 2018 principally due to
lower returns on LPs. The annualized investment yield, after tax, also
decreased slightly, from 3.5% in first quarter 2018 to 3.4% in first
quarter 2019, for the same reason. LPs produced a strong annualized
before tax return of 13.4% in first quarter 2019, but lower than an
exceptionally strong level of 18.6% in first quarter 2018. Excluding
LPs, the annualized investment yield, before tax, was flat compared with
first quarter 2018 at 3.7% for both periods.
The P&C annualized investment yield, before tax, was 4.2% in first
quarter 2019, down slightly from 4.3% in first quarter 2018 due
principally to lower returns on LPs, which were 13.0% in P&C compared
with 17.0% in the prior year quarter. The P&C annualized yield, after
tax, was 3.6%, up slightly from 3.5% in first quarter 2018 and the P&C
annualized investment yield, after tax, excluding LPs, was also up
slightly to 3.2% from 3.1%, both due to higher reinvestment and
short-term rates.
The Group Benefits annualized investment yield, before tax, was 4.2% in
first quarter 2019, down slightly from 4.3% in first quarter 2018
principally due to lower returns on LPs, which were 15.6% in first
quarter 2019, down from 28.3% in first quarter 2018. The Group Benefits
annualized investment yield, after tax, was 3.4%, also down slightly
from 3.5% in first quarter 2019 due to LP returns. The annualized
investment yield, after tax, excluding LPs was flat at 3.2% in both
periods.
CONFERENCE CALL
The Hartford will discuss its first quarter 2019 financial results on a
webcast at 8 a.m. EDT on Thursday, May 2, 2019. The call can be accessed
via a live listen-only webcast or as a replay through the Investor
Relations section of The Hartford's website at
https://ir.thehartford.com
.
The replay will be accessible approximately one hour after the
conclusion of the call and be available along with a transcript of the
event for at least one year.
More detailed financial information can be found in The Hartford's
Investor Financial Supplement for March 31, 2019, and the First Quarter
2019 Financial Results Presentation, both of which are available at
https://ir.thehartford.com
.
ABOUT THE HARTFORD
The Hartford is a leader in property and casualty insurance, group
benefits and mutual funds. With more than 200 years of expertise, The
Hartford is widely recognized for its service excellence, sustainability
practices, trust and integrity. More information on the company and its
financial performance is available at
https://www.thehartford.com
.
Follow us on Twitter at
www.twitter.com/TheHartford_PR
.
The Hartford Financial Services Group, Inc., (NYSE: HIG) operates
through its subsidiaries under the brand name, The Hartford, and is
headquartered in Hartford, Conn. For additional details, please read The
Hartford’s legal notice at
https://www.thehartford.com/legal-notice
.
HIG-F
From time to time, The Hartford may use 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
https://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
https://ir.thehartford.com
.
|
|
|
|
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
|
|
|
CONSOLIDATING INCOME STATEMENTS
|
|
|
Three Months Ended March 31, 2019
|
|
|
($ in millions)
|
|
|
|
|
|
|
Commercial
Lines
|
|
|
Personal
Lines
|
|
|
P&C
Other Ops
|
|
|
Group
Benefits
|
|
|
Hartford
Funds
|
|
|
Corporate
|
|
|
Consolidated
|
|
Earned premiums
|
|
|
|
$
|
1,777
|
|
|
|
$
|
799
|
|
|
|
$
|
—
|
|
|
|
$
|
1,364
|
|
|
|
$
|
—
|
|
|
|
$
|
—
|
|
|
|
$
|
3,940
|
|
|
Fee income
|
|
|
|
9
|
|
|
|
9
|
|
|
|
—
|
|
|
|
45
|
|
|
|
238
|
|
|
|
13
|
|
|
|
314
|
|
|
Net investment income
|
|
|
|
259
|
|
|
|
42
|
|
|
|
22
|
|
|
|
121
|
|
|
|
2
|
|
|
|
24
|
|
|
|
470
|
|
|
Other revenues
|
|
|
|
—
|
|
|
|
19
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
34
|
|
|
|
53
|
|
|
Net realized capital gains
|
|
|
|
115
|
|
|
|
19
|
|
|
|
9
|
|
|
|
5
|
|
|
|
2
|
|
|
|
13
|
|
|
|
163
|
|
|
Total revenues
|
|
|
|
2,160
|
|
|
|
888
|
|
|
|
31
|
|
|
|
1,535
|
|
|
|
242
|
|
|
|
84
|
|
|
|
4,940
|
|
|
Benefits, losses, and loss adjustment expenses
|
|
|
|
1,097
|
|
|
|
533
|
|
|
|
—
|
|
|
|
1,053
|
|
|
|
—
|
|
|
|
2
|
|
|
|
2,685
|
|
|
Amortization of DAC
|
|
|
|
274
|
|
|
|
65
|
|
|
|
—
|
|
|
|
13
|
|
|
|
3
|
|
|
|
—
|
|
|
|
355
|
|
|
Insurance operating costs and other expenses
|
|
|
|
345
|
|
|
|
170
|
|
|
|
3
|
|
|
|
315
|
|
|
|
202
|
|
|
|
13
|
|
|
|
1,048
|
|
|
Interest expense
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
64
|
|
|
|
64
|
|
|
Amortization of other intangible assets
|
|
|
|
2
|
|
|
|
1
|
|
|
|
—
|
|
|
|
10
|
|
|
|
—
|
|
|
|
—
|
|
|
|
13
|
|
|
Total benefits and expenses
|
|
|
|
1,718
|
|
|
|
769
|
|
|
|
3
|
|
|
|
1,391
|
|
|
|
205
|
|
|
|
79
|
|
|
|
4,165
|
|
|
Income before income taxes
|
|
|
|
442
|
|
|
|
119
|
|
|
|
28
|
|
|
|
144
|
|
|
|
37
|
|
|
|
5
|
|
|
|
775
|
|
|
Income tax expense
|
|
|
|
79
|
|
|
|
23
|
|
|
|
5
|
|
|
|
26
|
|
|
|
7
|
|
|
|
5
|
|
|
|
145
|
|
|
Income from continuing operations, after tax
|
|
|
|
363
|
|
|
|
96
|
|
|
|
23
|
|
|
|
118
|
|
|
|
30
|
|
|
|
—
|
|
|
|
630
|
|
|
Net income
|
|
|
|
363
|
|
|
|
96
|
|
|
|
23
|
|
|
|
118
|
|
|
|
30
|
|
|
|
—
|
|
|
|
630
|
|
|
Preferred stock dividends
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5
|
|
|
|
5
|
|
|
Net income (loss) available to common stockholders
|
|
|
|
363
|
|
|
|
96
|
|
|
|
23
|
|
|
|
118
|
|
|
|
30
|
|
|
|
(5
|
)
|
|
|
625
|
|
|
Less: Net realized capital losses, excluded from core earnings,
before tax
|
|
|
|
113
|
|
|
|
18
|
|
|
|
9
|
|
|
|
5
|
|
|
|
2
|
|
|
|
13
|
|
|
|
160
|
|
|
Less: Integration and transaction costs, before tax
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(9
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(10
|
)
|
|
Less: Income tax expense
|
|
|
|
(23
|
)
|
|
|
(4
|
)
|
|
|
(2
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(3
|
)
|
|
|
(32
|
)
|
|
Core earnings (losses)
|
|
|
|
$
|
274
|
|
|
|
$
|
82
|
|
|
|
$
|
16
|
|
|
|
$
|
122
|
|
|
|
$
|
28
|
|
|
|
$
|
(15
|
)
|
|
|
$
|
507
|
|
|
|
|
|
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
|
|
|
CONSOLIDATING INCOME STATEMENTS
|
|
|
Three Months Ended March 31, 2018
|
|
|
($ in millions)
|
|
|
|
|
|
|
Commercial
Lines
|
|
|
Personal
Lines
|
|
|
P&C
Other Ops
|
|
|
Group
Benefits
|
|
|
Hartford
Funds
|
|
|
Corporate
|
|
|
Consolidated
|
|
Earned premiums
|
|
|
|
$
|
1,711
|
|
|
|
$
|
859
|
|
|
|
$
|
—
|
|
|
|
$
|
1,357
|
|
|
|
$
|
—
|
|
|
|
$
|
—
|
|
|
|
$
|
3,927
|
|
|
Fee income
|
|
|
|
9
|
|
|
|
10
|
|
|
|
—
|
|
|
|
44
|
|
|
|
258
|
|
|
|
2
|
|
|
|
323
|
|
|
Net investment income
|
|
|
|
258
|
|
|
|
40
|
|
|
|
24
|
|
|
|
121
|
|
|
|
1
|
|
|
|
7
|
|
|
|
451
|
|
|
Other revenues
|
|
|
|
1
|
|
|
|
19
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
20
|
|
|
Net realized capital gains (losses)
|
|
|
|
(8
|
)
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
(25
|
)
|
|
|
—
|
|
|
|
4
|
|
|
|
(30
|
)
|
|
Total revenues
|
|
|
|
1,971
|
|
|
|
928
|
|
|
|
23
|
|
|
|
1,497
|
|
|
|
259
|
|
|
|
13
|
|
|
|
4,691
|
|
|
Benefits, losses, and loss adjustment expenses
|
|
|
|
1,021
|
|
|
|
587
|
|
|
|
—
|
|
|
|
1,085
|
|
|
|
—
|
|
|
|
2
|
|
|
|
2,695
|
|
|
Amortization of DAC
|
|
|
|
257
|
|
|
|
71
|
|
|
|
—
|
|
|
|
10
|
|
|
|
4
|
|
|
|
—
|
|
|
|
342
|
|
|
Insurance operating costs and other expenses
|
|
|
|
327
|
|
|
|
159
|
|
|
|
3
|
|
|
|
321
|
|
|
|
212
|
|
|
|
15
|
|
|
|
1,037
|
|
|
Interest expense
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
80
|
|
|
|
80
|
|
|
Amortization of other intangible assets
|
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
17
|
|
|
|
—
|
|
|
|
—
|
|
|
|
18
|
|
|
Total benefits and expenses
|
|
|
|
1,605
|
|
|
|
818
|
|
|
|
3
|
|
|
|
1,433
|
|
|
|
216
|
|
|
|
97
|
|
|
|
4,172
|
|
|
Income (loss) before income taxes
|
|
|
|
366
|
|
|
|
110
|
|
|
|
20
|
|
|
|
64
|
|
|
|
43
|
|
|
|
(84
|
)
|
|
|
519
|
|
|
Income tax expense (benefit)
|
|
|
|
68
|
|
|
|
21
|
|
|
|
3
|
|
|
|
10
|
|
|
|
9
|
|
|
|
(20
|
)
|
|
|
91
|
|
|
Income (loss) from continuing operations, after tax
|
|
|
|
298
|
|
|
|
89
|
|
|
|
17
|
|
|
|
54
|
|
|
|
34
|
|
|
|
(64
|
)
|
|
|
428
|
|
|
Income from discontinued operations, after tax
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
169
|
|
|
|
169
|
|
|
Net income
|
|
|
|
298
|
|
|
|
89
|
|
|
|
17
|
|
|
|
54
|
|
|
|
34
|
|
|
|
105
|
|
|
|
597
|
|
|
Less: Net realized capital gains (losses), excluded from core
earnings, before tax
|
|
|
|
(6
|
)
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
(26
|
)
|
|
|
—
|
|
|
|
4
|
|
|
|
(30
|
)
|
|
Less: Integration and transaction costs, before tax
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(12
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(12
|
)
|
|
Less: Income tax benefit (expense)
|
|
|
|
2
|
|
|
|
1
|
|
|
|
1
|
|
|
|
7
|
|
|
|
—
|
|
|
|
(2
|
)
|
|
|
9
|
|
|
Less: Income from discontinued operations, after tax
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
169
|
|
|
|
169
|
|
|
Core earnings (losses)
|
|
|
|
$
|
302
|
|
|
|
$
|
89
|
|
|
|
$
|
17
|
|
|
|
$
|
85
|
|
|
|
$
|
34
|
|
|
|
$
|
(66
|
)
|
|
|
$
|
461
|
|
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 2019, which is available on The Hartford's website,
https://ir.thehartford.com
.
Annualized investment yield, excluding limited
partnerships and other alternative investments
is the
annualized net investment income on a Consolidated, P&C or Group
Benefits level excluding limited partnerships and other alternative
investments divided by such monthly average invested assets at amortized
cost, excluding repurchase agreement and securities lending collateral,
derivatives book value, and limited partnerships and other alternative
investments. The company believes that annualized investment yield,
excluding limited partnerships and other alternative investments,
provides investors with an important measure of the trend in investment
earnings because it excludes the impact of the volatility in returns
related to limited partnerships and other alternative investments.
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
Mar 31
2019
|
|
|
Mar 31
2018
|
|
|
|
Mar 31
2019
|
|
|
Mar 31
2018
|
|
|
|
Mar 31
2019
|
|
|
Mar 31
2018
|
|
|
|
|
|
Consolidated
|
|
|
|
P&C
|
|
|
|
Group Benefits
|
|
Annualized investment yield
|
|
|
|
4.1%
|
|
|
4.2%
|
|
|
|
4.2%
|
|
|
4.3%
|
|
|
|
4.2%
|
|
|
4.3%
|
|
Less: Impact on annualized investment yield of limited partnerships
and other alternative investments
|
|
|
|
0.4%
|
|
|
0.5%
|
|
|
|
0.4%
|
|
|
0.6%
|
|
|
|
0.3%
|
|
|
0.5%
|
|
Annualized investment yield excluding limited partnerships and other
alternative investments
|
|
|
|
3.7%
|
|
|
3.7%
|
|
|
|
3.8%
|
|
|
3.7%
|
|
|
|
3.9%
|
|
|
3.8%
|
Book value per diluted share (excluding AOCI)
is calculated based upon non-GAAP financial measures. It is calculated
by dividing (a) common stockholders' equity, excluding AOCI, after tax,
by (b) common shares outstanding and dilutive potential common shares.
The Company provides this measure to enable investors to analyze the
amount of the Company's net worth that is primarily attributable to the
Company's business operations. The Company believes it is useful to
investors because it eliminates the effect of items that can fluctuate
significantly from period to period, primarily based on changes in
interest rates. Book value per diluted share is the most directly
comparable U.S. GAAP measure. A reconciliation of book value per diluted
share, including AOCI to book value per diluted share (excluding AOCI)
is set forth below.
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
|
|
Mar 31
2019
|
|
|
Dec 31
2018
|
|
|
Change
|
|
Book value per diluted share
|
|
|
|
$38.36
|
|
|
$35.06
|
|
|
9%
|
|
Less: Per diluted share impact of AOCI
|
|
|
|
$(2.43)
|
|
|
$(4.34)
|
|
|
44%
|
|
Book value per diluted share (excluding AOCI)
|
|
|
|
$40.79
|
|
|
$39.40
|
|
|
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,
integration and transaction costs in connection with an acquired
business, loss on extinguishment of debt, gains and losses on
reinsurance transactions, income tax benefit from reduction in deferred
income tax valuation allowance, and results of discontinued operations.
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) 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. These net realized gains and losses
are directly related to an offsetting item included in the income
statement such as net investment income. Results from discontinued
operations are excluded from core earnings for businesses held for sale
because such results could obscure trends in our ongoing businesses that
are valuable to our investors' ability to assess the company's financial
performance.
Core earnings are net of preferred stock dividends declared since they
are a cost of financing more akin to interest expense on debt and are
expected to be a recurring expense as long as the preferred stock is
outstanding.
Net income (loss), net income (loss) available to common stockholders
and income from continuing operations, net of tax, available to common
stockholders (during periods when the company reports significant
discontinued operations) are the most directly comparable U.S. GAAP
measures to core earnings. Income from continuing operations, net of
tax, available to common stockholders is net income available to common
stockholders, excluding the income (loss) from discontinued operations,
net of tax. Core earnings should not be considered as a substitute for
net income (loss),net income (loss) available to common stockholders or
income (loss) from continuing operations, net of tax, available to
common stockholders and does not reflect the overall profitability of
the company’s business. Therefore, The Hartford believes that it is
useful for investors to evaluate net income (loss), net income (loss)
available to common stockholders, income (loss) from continuing
operations, net of tax, available to common stockholders and core
earnings when reviewing the company’s performance.
A reconciliation of net income (loss) to core earnings for the quarterly
periods ended March 31, 2019 and 2018, is included in this press
release. A reconciliation of net income (loss) to core earnings 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, 2019.
Core earnings margin: The Hartford uses the
non-GAAP measure core earnings margin to evaluate, and believes it is an
important measure of, the Group Benefits segment's operating
performance. Core earnings margin is calculated by dividing core
earnings by revenues, excluding buyouts and realized gains (losses). Net
income margin is the most directly comparable U.S. GAAP measure. The
company believes that core earnings margin 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 and
realized gains (losses). Core earnings margin should not be considered
as a substitute for net income margin and does not reflect the overall
profitability of Group Benefits. Therefore, the company believes it is
important for investors to evaluate both core earnings margin and net
income margin when reviewing performance. A reconciliation of net income
margin to core earnings margin for the quarterly periods ended March 31,
2019 and 2018, is set forth below.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Margin
|
|
|
|
Mar 31
2019
|
|
|
Mar 31
2018
|
|
|
Change
|
|
Net income margin
|
|
|
|
7.7%
|
|
|
3.6%
|
|
|
4.1
|
|
Less: Net realized capital gains (losses) excluded from core
earnings, before tax
|
|
|
|
0.3%
|
|
|
(1.7)%
|
|
|
2.0
|
|
Less: Integration and transaction costs associated with acquired
business, before tax
|
|
|
|
(0.6)%
|
|
|
(0.8)%
|
|
|
0.2
|
|
Less: Income tax benefit
|
|
|
|
—%
|
|
|
0.5%
|
|
|
(0.5)
|
|
Core earnings margin
|
|
|
|
8.0%
|
|
|
5.6%
|
|
|
2.4
|
|
|
|
|
|
|
|
|
|
|
|
|
Core earnings per diluted share: Core
earnings 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 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), available to common stockholders per diluted common share and
income (loss) from continuing operations, net of tax, available to
common stockholders per diluted common share are the most directly
comparable GAAP measures. Core earnings per diluted share should not be
considered as a substitute for net income (loss) available to common
stockholders per diluted common share or income (loss) from continuing
operations, net of tax, available to common stockholders per diluted
common 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 net income (loss) available to common stockholders per diluted
common share, income (loss) from continuing operations, net of tax,
available to common stockholders per diluted common share and core
earnings per diluted share when reviewing the company's performance. A
reconciliation of net income (loss) available to common stockholders per
diluted common share to core earnings per diluted share for the
quarterly periods ended March 31, 2019 and 2018 is provided in the table
below.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
Mar 31
2019
|
|
|
Mar 31
2018
|
|
|
Change
|
|
PER SHARE DATA
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders per share
1
|
|
|
|
$1.71
|
|
|
$1.64
|
|
|
4%
|
|
Less: income from discontinued operations, after tax
|
|
|
|
—
|
|
|
0.46
|
|
|
(100)%
|
|
Income from continuing operations, net of tax, available to
common stockholders
|
|
|
|
$1.71
|
|
|
$1.18
|
|
|
45%
|
|
Less: Net realized capital gains (losses), excluded from core
earnings, before tax
|
|
|
|
0.44
|
|
|
(0.08)
|
|
|
NM
|
|
Less: Integration and transaction costs associated with an acquired
business, before tax
|
|
|
|
(0.03)
|
|
|
(0.03)
|
|
|
—%
|
|
Less: Income tax benefit (expense) on items excluded from core
earnings
|
|
|
|
(0.09)
|
|
|
0.02
|
|
|
NM
|
|
Core earnings per share
|
|
|
|
$1.39
|
|
|
$1.27
|
|
|
9%
|
[1] Net income (loss) available to common stockholders includes
dilutive potential common shares
Core Earnings Return on Equity: The company
provides different measures of the return on stockholders' equity
(“ROE”). Net income (loss) available to common stockholders ROE ("net
income (loss) ROE) is calculated by dividing (a) net income (loss)
available to common stockholders for the prior four fiscal quarters by
(b) average common stockholders' equity, including AOCI. Core earnings
ROE is calculated based on non-GAAP financial measures. Core earnings
ROE is calculated by dividing (a) core earnings for the prior four
fiscal quarters by (b) average common stockholders' equity, excluding
AOCI. Net income ROE is the most directly comparable U.S. GAAP measure.
The company excludes AOCI in the calculation of core earnings ROE to
provide investors with a measure of how effectively the company is
investing the portion of the company's net worth that is primarily
attributable to the company's business operations. The company provides
to investors return on equity measures based on its non-GAAP core
earnings financial measures for the reasons set forth in the related
discussion above.
A reconciliation of consolidated net income (loss) ROE to Consolidated
Core earnings ROE is set forth below.
|
|
|
|
|
|
|
|
|
|
|
Last Twelve Months Ended
|
|
|
|
|
|
Mar 31 2019
|
|
|
Mar 31 2018
|
|
Net income (loss) available to common stockholders ROE
|
|
|
|
13.5%
|
|
|
(19.3)%
|
|
Less: Net realized capital gains excluded from core earnings, before
tax
|
|
|
|
0.5
|
|
|
0.7
|
|
Less: Pension settlement, before tax
|
|
|
|
—
|
|
|
(5.0)
|
|
Less: Integration and transaction costs associated with an acquired
business, before tax
|
|
|
|
(0.3)
|
|
|
(0.2)
|
|
Less: Income tax benefit (expense) on items not included in core
earnings
|
|
|
|
0.3
|
|
|
(4.3)
|
|
Less: Income (loss) from discontinued operations, after tax
|
|
|
|
1.1
|
|
|
(18.4)
|
|
Less: Impact of AOCI, excluded from core earnings ROE
|
|
|
|
0.4
|
|
|
0.1
|
|
Core earnings ROE
|
|
|
|
11.5%
|
|
|
7.8%
|
Net investment income, excluding limited
partnerships and other alternative investments:
is the
amount of net investment income, on a Consolidated, P&C or Group
Benefits level earned from such invested assets excluding the net
investment income related to limited partnerships and other alternative
investments. The company believes that net investment income, excluding
limited partnerships and other alternative instruments, provides
investors with an important measure of the trend in investment earnings
because it excludes the impact of the volatility in returns related to
limited partnerships and other alternative instruments.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
Mar 31
2019
|
|
|
Mar 31
2018
|
|
|
|
Mar 31
2019
|
|
|
Mar 31
2018
|
|
|
|
Mar 31
2019
|
|
|
Mar 31
2018
|
|
|
|
|
|
Consolidated
|
|
|
|
P&C
|
|
|
|
Group Benefits
|
|
Total net investment income
|
|
|
|
$470
|
|
|
|
$451
|
|
|
|
|
$323
|
|
|
|
$322
|
|
|
|
|
$121
|
|
|
|
$121
|
|
Less: Income from limited partnerships and other alternative assets
|
|
|
|
56
|
|
|
|
73
|
|
|
|
|
46
|
|
|
|
58
|
|
|
|
|
10
|
|
|
|
15
|
|
Net investment income excluding limited partnerships and other
alternative investments
|
|
|
|
$414
|
|
|
|
$378
|
|
|
|
|
$277
|
|
|
|
$264
|
|
|
|
|
$111
|
|
|
|
$106
|
Underlying combined ratio: Represents the
combined ratio before catastrophes and prior accident year development
(PYD) and 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 (also known as a loss 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
underlying combined ratio 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 underlying combined ratio for individual reporting segments can be
found in this press release under the heading "First Quarter 2019
Segment Financial Results Summary."
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
net income to underwriting results for the quarterly periods ended
March 31, 2019 and 2018, is set forth below:
Underlying underwriting gain (loss):
represents underwriting gain (loss) before current accident year
catastrophes and PYD. The most directly comparable GAAP measure is net
income (loss). The Company believes underlying underwriting gain (loss)
is important to understand the Company’s periodic earnings because the
volatile and unpredictable nature (i.e., the timing and amount) of
catastrophes and prior accident year reserve development could obscure
underwriting trends. A reconciliation of net income (loss) to underlying
underwriting gain (loss) for individual reporting segments for the
quarterly periods ended March 31, 2019 and 2018, is set forth below:
|
|
|
|
|
|
|
PROPERTY & CASUALTY
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
Mar 31 2019
|
|
|
Mar 31 2018
|
|
Net income
|
|
|
|
$
|
482
|
|
|
|
$
|
404
|
|
|
Less: Net investment income
|
|
|
|
323
|
|
|
|
322
|
|
|
Less: Net realized capital gains (losses)
|
|
|
|
143
|
|
|
|
(9
|
)
|
|
Less: Net servicing and other income
|
|
|
|
2
|
|
|
|
5
|
|
|
Add back: Income tax expense
|
|
|
|
107
|
|
|
|
92
|
|
|
Underwriting gain (loss)
|
|
|
|
121
|
|
|
|
178
|
|
|
Add back: Current accident year catastrophes
|
|
|
|
104
|
|
|
|
103
|
|
|
Add back: Prior accident year development
|
|
|
|
(11
|
)
|
|
|
(32
|
)
|
|
Underlying underwriting gain
|
|
|
|
$
|
214
|
|
|
|
$
|
249
|
|
|
|
|
|
|
|
|
COMMERCIAL LINES
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
Mar 31 2019
|
|
|
Mar 31 2018
|
|
Net income
|
|
|
|
$
|
363
|
|
|
|
$
|
298
|
|
|
Less: Net servicing loss
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
Less: Net investment income
|
|
|
|
259
|
|
|
|
258
|
|
|
Less: Net realized capital gains (losses)
|
|
|
|
115
|
|
|
|
(8
|
)
|
|
Less: Other income (expense)
|
|
|
|
(1
|
)
|
|
|
2
|
|
|
Add back: Income tax expense
|
|
|
|
79
|
|
|
|
68
|
|
|
Underwriting gain
|
|
|
|
70
|
|
|
|
114
|
|
|
Add back: Current accident year catastrophes
|
|
|
|
70
|
|
|
|
69
|
|
|
Add back: Prior accident year development
|
|
|
|
(10
|
)
|
|
|
(19
|
)
|
|
Underlying underwriting gain
|
|
|
|
$
|
130
|
|
|
|
$
|
164
|
|
|
|
|
|
|
|
|
PERSONAL LINES
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
Mar 31 2019
|
|
|
Mar 31 2018
|
|
Net income
|
|
|
|
$
|
96
|
|
|
|
$
|
89
|
|
|
Less: Net servicing income
|
|
|
|
3
|
|
|
|
4
|
|
|
Less: Net investment income
|
|
|
|
42
|
|
|
|
40
|
|
|
Less: Net realized capital gains
|
|
|
|
19
|
|
|
|
—
|
|
|
Less: Other income (expense)
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
Add back: Income tax expense
|
|
|
|
23
|
|
|
|
21
|
|
|
Underwriting gain
|
|
|
|
54
|
|
|
|
67
|
|
|
Add back: Current accident year catastrophes
|
|
|
|
34
|
|
|
|
34
|
|
|
Add back: Prior accident year development
|
|
|
|
(1
|
)
|
|
|
(13
|
)
|
|
Underlying underwriting gain
|
|
|
|
$
|
87
|
|
|
|
$
|
88
|
|
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 the risks and uncertainties identified
below, as well as factors described in such forward-looking statements
or in The Hartford's 2018 Annual Report on Form 10-K, Quarterly Reports
on Form 10-Q and other filings The Hartford makes with the Securities
and Exchange Commission.
Risks Relating to Economic, Political and Global
Market Conditions: 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, changes in trade regulation including tariffs and other
barriers or other potentially adverse macroeconomic developments on the
demand for our products and returns in our investment portfolios;
financial risk related to the continued reinvestment of our investment
portfolios; market risks associated with our business, including changes
in credit spreads, equity prices, interest rates, inflation rate and
market volatility; the impact on our investment portfolio if our
investment portfolio is concentrated in any particular segment of the
economy; the impacts of changing climate and weather patterns on our
businesses, operations and investment portfolio including on claims,
demand and pricing of our products, the availability and cost of
reinsurance, our modeling data used to evaluate and manage risks of
catastrophes and severe weather events, the value of our investment
portfolios and credit risk with reinsurers and other counterparties; the
risks associated with the change in or replacement of the London
Inter-Bank Offered Rate (LIBOR) on the securities we hold or may have
issued, other financial instruments and any other assets and liabilities
whose value is tied to LIBOR;
Insurance Industry and Product-Related Risks: the
possibility of unfavorable loss development including with respect to
long-tailed exposures; the significant uncertainties that limit our
ability to estimate the ultimate reserves necessary for asbestos and
environmental claims; 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
intensity and frequency of storms, hail, wildfires, flooding, winter
storms, hurricanes and tropical storms, as well as climate change and
its potential impact on weather patterns; the possible occurrence of
terrorist attacks and the company’s inability to contain its exposure as
a result of, among other factors, the inability to exclude coverage for
terrorist attacks from workers' compensation policies and limitations on
reinsurance coverage from the federal government under applicable laws;
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;
actions by competitors that may be larger or have greater financial
resources than we do; technological changes, such as usage-based methods
of determining premiums, advancements in automotive safety features, the
development of autonomous vehicles, and platforms that facilitate ride
sharing, which 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 company's ability
to market, distribute and provide insurance products and investment
advisory services through current and future distribution channels and
advisory firms; the uncertain effects of emerging claim and coverage
issues;
Financial Strength, Credit and Counterparty Risks:
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 credit risk with counterparties associated with
investments, derivatives, premiums receivable, reinsurance recoverables
and indemnifications provided by third parties in connection with
previous dispositions; 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; regulatory limitations on the ability of the
company and certain of its subsidiaries to declare and pay dividends;
Risks Relating to Estimates, Assumptions and
Valuations: risk associated with the use of analytical models in
making decisions in key areas such as underwriting, capital management,
reserving, and catastrophe risk management; the potential for differing
interpretations of the methodologies, estimations and assumptions that
underlie the company’s fair value estimates for its investments and the
evaluation of other-than-temporary impairments on available-for-sale
securities; the potential for further impairments of our goodwill or the
potential for changes in valuation allowances against deferred tax
assets;
Strategic and Operational Risks: 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
potential for difficulties arising from outsourcing and similar
third-party relationships; the risks, challenges and uncertainties
associated with capital management plans, expense reduction initiatives
and other actions, which may include acquisitions, divestitures or
restructurings; failure to complete our proposed acquisition of The
Navigators Group, Inc. may cause volatility in our securities; risks
associated with acquisitions and divestitures including the challenges
of integrating acquired companies or businesses or separating from our
divested businesses that may result in our not being able to achieve the
anticipated benefits and synergies and may result in unintended
consequences; difficulty in attracting and retaining talented and
qualified personnel including key employees, such as executives,
managers and employees with strong technological, analytical and other
specialized skills; and the company’s ability to protect its
intellectual property and defend against claims of infringement;
Regulatory and Legal Risks: the cost and
other potential effects of changes in regulatory and legislative
developments, including those that could adversely impact the demand for
the company’s products, operating costs and required capital levels;
unfavorable judicial or other legal developments; the impact of changes
in federal or state tax laws; regulatory requirements that could delay,
deter or prevent a takeover attempt that stockholders might consider in
their best interests; and the impact of potential changes in accounting
principles and related financial reporting requirements.
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.
