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The HartFord (HIG) Q1 Earnings Miss, Revenues Increase Y/Y
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The Hartford Financial Services Group, Inc. (HIG - Free Report) reported first-quarter 2017 adjusted operating earnings of $1.00 per share, which missed the Zacks Consensus Estimate of $1.02 by roughly 2%. Earnings, however, grew 5.3% year over year.
The increase in earnings per diluted share reflects a 17% improvement in net income and a 7% reduction in weighted average diluted common shares outstanding in first quarter 2017, both on a year-over-year basis. The reduction in weighted average diluted common shares outstanding was primarily due to the company's repurchase of 29.1 million common shares for a total of $1.3 billion over the last four quarters.
Total operating revenue of The Hartford came in at $4.6 billion, up 2.4% year over year. The top-line improvement was primarily driven by a 5% increase in net investment income and a 2% rise in earned premiums, both on a year-over-year basis.
Quarterly Segment Results
Property & Casualty (P&C):
Commercial Line
During the first quarter, Commercial Lines operating revenues were $1.9 billion, up 8% year over year.
Commercial Lines net income grew 3% to $231 million over the prior-year quarter due to favorable change in net realized capital gains and higher net investment income.
Commercial Lines underlying combined ratio was 90.9%, up 130 basis points (bps) year over year primarily due to higher current accident year commercial auto and general liability loss costs.
Personal Lines
Personal Lines total revenue was $1 billion, down 2.7% year over year. This was due to lower new business and lesser policy count retention.
This segment generated net income of $33 million, up 43% year over year, primarily due to higher underwriting gain and net investment income.
The Personal Lines underlying combined ratio was 91.2, up 150 bps from first-quarter 2016. This was primarily due to higher auto liability and non-catastrophe homeowners’ losses.
Group Benefits:
Group Benefits’ total revenue grew 6% to $938 million due to strong persistency and increased pricing.
This segment generated net income of $50 million, down 10% year over year. This was primarily due to a state guaranty fund assessment of $13 million, after-tax, related to the liquidation of a Pennsylvania long-term care insurance company.
Total loss ratio of 77.7% remained flat with first-quarter 2016. This was due to a slight improvement in group life owing to lower incidence. Also, a modest deterioration in group disability due to an increase in expected long-term disability claim severity contributed to the result.
Mutual Funds:
Mutual Funds operating revenues grew 15% year over year to $192 million.
Mutual Funds net income of $23 million rose 15% over the last-year quarter. The upside was driven by higher revenues as a result of the 14% increase in assets under management (AUM) over the past year.
Average AUM increased 14% year over year to $103.2 billion, mainly due to market appreciation and the addition of Schroders Mutual Funds.
Talcott Resolution:
Talcott Resolution operating revenues grew 10.2% year over year to $531 million.
Talcott Resolution net income was $68 million compared with $17 million in first-quarter 2016. This was due to lower net realized capital losses in first quarter 2017.
Corporate:
Corporate segment declined 37.5% year over year to $5 million.
The Corporate segment recorded net loss of $46 million, wider than a net loss of $29 million in the prior-year quarter. This was due to a $25 million income tax benefit related to the reduction of the deferred tax valuation allowance on capital loss carry-forward.
Hartford Financial Services Group, Inc. (The) Price, Consensus and EPS Surprise
Book value per diluted share as of Mar 31, 2017 rose 2% over year-end 2016 to $45.25. The increase in book value per diluted share reflects 1% growth in stockholders' equity and 1% decrease in common shares outstanding and dilutive potential common shares.
Net income return on equity (ROE) was 5.4% in the first quarter, down 290 bps from the last-year quarter.
Core earnings ROE was 7.6% in the first quarter, down 120 bps from first-quarter 2016.
Share Repurchases
During the first quarter, The Hartford repurchased 6.7 million common shares for approximately $325 million.
As of Apr 25, 2017, it repurchased 1.9 million common shares for $92 million out of the authorization for second-quarter 2017. The company presently has $883 million available under the $1.3 billion 2017 share repurchase authorization.
During the first quarter, The Hartford paid $87 million of common dividends to shareholders for a total return of capital to shareholders of $412 million during the quarter.
Among other players from the same space that have reported their first-quarter earnings so far, the bottom line at The Progressive Corporation (PGR - Free Report) , The Travelers Companies, Inc. (TRV - Free Report) and RLI Corp. (RLI - Free Report) missed their respective Zacks Consensus Estimate.
Zacks' Hidden Trades
While we share many recommendations and ideas with the public, certain moves are hidden from everyone but selected members of our portfolio services. Would you like to peek behind the curtain today and view them?
Starting now, for the next month, I invite you to follow all Zacks' private buys and sells in real time from value to momentum...from stocks under $10 to ETF to option movers...from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors.
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The HartFord (HIG) Q1 Earnings Miss, Revenues Increase Y/Y
The Hartford Financial Services Group, Inc. (HIG - Free Report) reported first-quarter 2017 adjusted operating earnings of $1.00 per share, which missed the Zacks Consensus Estimate of $1.02 by roughly 2%. Earnings, however, grew 5.3% year over year.
The increase in earnings per diluted share reflects a 17% improvement in net income and a 7% reduction in weighted average diluted common shares outstanding in first quarter 2017, both on a year-over-year basis. The reduction in weighted average diluted common shares outstanding was primarily due to the company's repurchase of 29.1 million common shares for a total of $1.3 billion over the last four quarters.
Total operating revenue of The Hartford came in at $4.6 billion, up 2.4% year over year. The top-line improvement was primarily driven by a 5% increase in net investment income and a 2% rise in earned premiums, both on a year-over-year basis.
Quarterly Segment Results
Property & Casualty (P&C):
Commercial Line
During the first quarter, Commercial Lines operating revenues were $1.9 billion, up 8% year over year.
Commercial Lines net income grew 3% to $231 million over the prior-year quarter due to favorable change in net realized capital gains and higher net investment income.
Commercial Lines underlying combined ratio was 90.9%, up 130 basis points (bps) year over year primarily due to higher current accident year commercial auto and general liability loss costs.
Personal Lines
Personal Lines total revenue was $1 billion, down 2.7% year over year. This was due to lower new business and lesser policy count retention.
This segment generated net income of $33 million, up 43% year over year, primarily due to higher underwriting gain and net investment income.
The Personal Lines underlying combined ratio was 91.2, up 150 bps from first-quarter 2016. This was primarily due to higher auto liability and non-catastrophe homeowners’ losses.
Group Benefits:
Group Benefits’ total revenue grew 6% to $938 million due to strong persistency and increased pricing.
This segment generated net income of $50 million, down 10% year over year. This was primarily due to a state guaranty fund assessment of $13 million, after-tax, related to the liquidation of a Pennsylvania long-term care insurance company.
Total loss ratio of 77.7% remained flat with first-quarter 2016. This was due to a slight improvement in group life owing to lower incidence. Also, a modest deterioration in group disability due to an increase in expected long-term disability claim severity contributed to the result.
Mutual Funds:
Mutual Funds operating revenues grew 15% year over year to $192 million.
Mutual Funds net income of $23 million rose 15% over the last-year quarter. The upside was driven by higher revenues as a result of the 14% increase in assets under management (AUM) over the past year.
Average AUM increased 14% year over year to $103.2 billion, mainly due to market appreciation and the addition of Schroders Mutual Funds.
Talcott Resolution:
Talcott Resolution operating revenues grew 10.2% year over year to $531 million.
Talcott Resolution net income was $68 million compared with $17 million in first-quarter 2016. This was due to lower net realized capital losses in first quarter 2017.
Corporate:
Corporate segment declined 37.5% year over year to $5 million.
The Corporate segment recorded net loss of $46 million, wider than a net loss of $29 million in the prior-year quarter. This was due to a $25 million income tax benefit related to the reduction of the deferred tax valuation allowance on capital loss carry-forward.
Hartford Financial Services Group, Inc. (The) Price, Consensus and EPS Surprise
Hartford Financial Services Group, Inc. (The) Price, Consensus and EPS Surprise | Hartford Financial Services Group, Inc. (The) Quote
Financial Update
Book value per diluted share as of Mar 31, 2017 rose 2% over year-end 2016 to $45.25. The increase in book value per diluted share reflects 1% growth in stockholders' equity and 1% decrease in common shares outstanding and dilutive potential common shares.
Net income return on equity (ROE) was 5.4% in the first quarter, down 290 bps from the last-year quarter.
Core earnings ROE was 7.6% in the first quarter, down 120 bps from first-quarter 2016.
Share Repurchases
During the first quarter, The Hartford repurchased 6.7 million common shares for approximately $325 million.
As of Apr 25, 2017, it repurchased 1.9 million common shares for $92 million out of the authorization for second-quarter 2017. The company presently has $883 million available under the $1.3 billion 2017 share repurchase authorization.
During the first quarter, The Hartford paid $87 million of common dividends to shareholders for a total return of capital to shareholders of $412 million during the quarter.
Zacks Rank and Performance of Other Insurers
The Hartford presently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Among other players from the same space that have reported their first-quarter earnings so far, the bottom line at The Progressive Corporation (PGR - Free Report) , The Travelers Companies, Inc. (TRV - Free Report) and RLI Corp. (RLI - Free Report) missed their respective Zacks Consensus Estimate.
Zacks' Hidden Trades
While we share many recommendations and ideas with the public, certain moves are hidden from everyone but selected members of our portfolio services. Would you like to peek behind the curtain today and view them?
Starting now, for the next month, I invite you to follow all Zacks' private buys and sells in real time from value to momentum...from stocks under $10 to ETF to option movers...from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors.
Click here for Zacks' secret trade>>