The Hartford Financial Services Group, Inc. (HIG - Free Report) reported second-quarter 2016 operating earnings of 31 cents per share, which missed the Zacks Consensus Estimate by roughly 60% and also plunged 66% year over year.
The underperformance stemmed due to the weakness in Personal Lines automobile and P&C Other Operations along with shut down of asbestos and poor performance of environmental (A&E) lines. However, underlying margins remained strong in Commercial Lines and Group Benefits.
Including extraordinary items, The Hartford reported net income of 54 cents per share, down 44% year over year.
Total revenue of The Hartford came in at $4.7 billion, down 0.17% year over year. The downside can be attributed mainly to lower premiums earned, fee income and less net investment income.
Segment Results
Property & Casualty (P&C): This segment’s core earnings were $15 million, down 92% from $193 million in the year-ago quarter. The P&C segment reported net income of $33 million in the second quarter, down 82% from $189 million in the prior-year period.
After tax, P&C underwriting losses were wider by $159 million from the year-ago quarter largely due to higher unfavorable PYD for the Personal Lines automobile. Shut down of asbestos and poor performance of environmental (A&E) lines, higher catastrophe losses and lower current accident year also contributed significantly to this loss.
P&C written premiums inched up 1.4% from the year-ago quarter to $2.6 billion on the back of growth in Commercial Lines and Personal Lines.
Investment income of $226 million decreased 5.4% year over year, while other revenues improved 15% from the year-ago quarter to $23 million.
Group Benefits: This segment of The Hartford generated core earnings of $46 million, down 19% year over year. The decline was attributable to lower net investment income and increased losses, partially offset by decreased expenses. Net income came in at $55 million, down 1.8% from $56 million in the prior-year quarter.
Group Benefits’ fully-insured ongoing premiums inched up 1% to $790 million. Loss ratio deteriorated 90 basis points year over year to 78.5% owing to the rise in group life loss ratio.
Mutual Funds: Core earnings at The Hartford’s Mutual Funds segment were $20 million, down 9.1% year over year. This was due to a decline in fees on account of lower average Assets Under Management (AUM) than the prior-year quarter. Net income in the quarter declined 9.1% year over year to $20 million. As of Jun 30, 2016, total AUM came in at $90.9 billion compared with $95.8 billion at the end of second-quarter 2015, primarily due to the steady runoff of Talcott AUM. The net flows of Mutual Fund decreased mainly due to higher redemption.
Talcott Resolution: Core earnings at Talcott Resolution plummeted 47% year over year to $91 million. The deterioration is attributable to the lesser fee income due to the continued runoff of the annuity business. The segment’s net income of $104 million saw a sharp decline of 52% from the year-ago income of $217 million.
Corporate: The Hartford’s Corporate segment recorded core loss of $50 million, slightly narrower than the year-ago quarter loss of $53 million. Also, the segment recorded net income of $4 million. It has incurred a loss of $71 million in the year-ago quarter.
Financial Update
Net investment income of The Hartford declined around 7.7% year over year to $735 million in the reported quarter. This was largely due to a decrease in lower limited partnership.
The Hartford’s shareholder equity came in at $18.6 billion as of Jun 30, 2016, up 5.2% from $17.6 billion as of Dec 31, 2015.
Book value per share increased roughly 10% to $47.02 from $42.86 as of Dec 31, 2015. Excluding AOCI, The Hartford’s book value per share came in at $44.74 as of Jun 30, 2016, up 5.5% from $42.41 as of Dec 31, 2015.
Dividend and Securities Update
The Hartford spent $350 million for share repurchases and $82 million for dividend payment during the second quarter.
Zacks Rank and Performance of Other Insurers
Hartford Financial presently carries an unfavorable Zacks Rank #4 (Sell).
Among other property and casualty insurers that have reported their second-quarter earnings so far, the bottom line at RLI Corp. (RLI - Free Report) and Progressive Corp. (PGR - Free Report) missed their respective Zacks Consensus Estimates, while First American Financial Corporation’s (FAF - Free Report) earnings beat the same.
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The Hartford Financial Services Group, Inc. (HIG - Free Report) reported second-quarter 2016 operating earnings of 31 cents per share, which missed the Zacks Consensus Estimate by roughly 60% and also plunged 66% year over year.
The underperformance stemmed due to the weakness in Personal Lines automobile and P&C Other Operations along with shut down of asbestos and poor performance of environmental (A&E) lines. However, underlying margins remained strong in Commercial Lines and Group Benefits.
Including extraordinary items, The Hartford reported net income of 54 cents per share, down 44% year over year.
Total revenue of The Hartford came in at $4.7 billion, down 0.17% year over year. The downside can be attributed mainly to lower premiums earned, fee income and less net investment income.
Segment Results
Property & Casualty (P&C): This segment’s core earnings were $15 million, down 92% from $193 million in the year-ago quarter. The P&C segment reported net income of $33 million in the second quarter, down 82% from $189 million in the prior-year period.
After tax, P&C underwriting losses were wider by $159 million from the year-ago quarter largely due to higher unfavorable PYD for the Personal Lines automobile. Shut down of asbestos and poor performance of environmental (A&E) lines, higher catastrophe losses and lower current accident year also contributed significantly to this loss.
P&C written premiums inched up 1.4% from the year-ago quarter to $2.6 billion on the back of growth in Commercial Lines and Personal Lines.
Investment income of $226 million decreased 5.4% year over year, while other revenues improved 15% from the year-ago quarter to $23 million.
Group Benefits: This segment of The Hartford generated core earnings of $46 million, down 19% year over year. The decline was attributable to lower net investment income and increased losses, partially offset by decreased expenses. Net income came in at $55 million, down 1.8% from $56 million in the prior-year quarter.
Group Benefits’ fully-insured ongoing premiums inched up 1% to $790 million. Loss ratio deteriorated 90 basis points year over year to 78.5% owing to the rise in group life loss ratio.
Mutual Funds: Core earnings at The Hartford’s Mutual Funds segment were $20 million, down 9.1% year over year. This was due to a decline in fees on account of lower average Assets Under Management (AUM) than the prior-year quarter. Net income in the quarter declined 9.1% year over year to $20 million. As of Jun 30, 2016, total AUM came in at $90.9 billion compared with $95.8 billion at the end of second-quarter 2015, primarily due to the steady runoff of Talcott AUM. The net flows of Mutual Fund decreased mainly due to higher redemption.
Talcott Resolution: Core earnings at Talcott Resolution plummeted 47% year over year to $91 million. The deterioration is attributable to the lesser fee income due to the continued runoff of the annuity business. The segment’s net income of $104 million saw a sharp decline of 52% from the year-ago income of $217 million.
Corporate: The Hartford’s Corporate segment recorded core loss of $50 million, slightly narrower than the year-ago quarter loss of $53 million. Also, the segment recorded net income of $4 million. It has incurred a loss of $71 million in the year-ago quarter.
Financial Update
Net investment income of The Hartford declined around 7.7% year over year to $735 million in the reported quarter. This was largely due to a decrease in lower limited partnership.
The Hartford’s shareholder equity came in at $18.6 billion as of Jun 30, 2016, up 5.2% from $17.6 billion as of Dec 31, 2015.
Book value per share increased roughly 10% to $47.02 from $42.86 as of Dec 31, 2015. Excluding AOCI, The Hartford’s book value per share came in at $44.74 as of Jun 30, 2016, up 5.5% from $42.41 as of Dec 31, 2015.
Dividend and Securities Update
The Hartford spent $350 million for share repurchases and $82 million for dividend payment during the second quarter.
Zacks Rank and Performance of Other Insurers
Hartford Financial presently carries an unfavorable Zacks Rank #4 (Sell).
Among other property and casualty insurers that have reported their second-quarter earnings so far, the bottom line at RLI Corp. (RLI - Free Report) and Progressive Corp. (PGR - Free Report) missed their respective Zacks Consensus Estimates, while First American Financial Corporation’s (FAF - Free Report) earnings beat the same.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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