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Hartford Financial (HIG) Beats on Q3 Earnings, Hikes Dividend
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The Hartford Financial Services Group, Inc. (HIG - Free Report) reported third-quarter 2022 adjusted operating earnings of $1.44 per share, which outpaced the Zacks Consensus Estimate by 11.6%. The bottom line climbed 14% year over year.
Operating revenues of HIG amounted to $3,830 million, which rose 3.6% year over year in the quarter under review. The top line also beat the consensus mark by 1.8%.
The quarterly results benefited from an improved property and casualty (P&C) earned premium, higher Group Benefits fully-insured ongoing premium and reduced excess mortality losses within group life. However, the upside was partly offset by escalating insurance operating expenses, lower net investment income and elevated catastrophe losses stemming from Hurricane Ian.
The Hartford Financial Services Group, Inc. Price, Consensus and EPS Surprise
Total earned premiums improved 7.6% year over year to $4,910 million, which surpassed the Zacks Consensus Estimate of $4,811 million and our estimate of $4,808.2 million.
Net investment income of $487 million dropped 25.1% year over year in the third quarter due to a decline in income from limited partnerships and other alternative investments (LPs). The metric witnessed a year-over-year downtrend across Hartford Financial’s Commercial Lines, Personal Lines, P&C Other Ops and Group Benefits segments. The reported figure beat the consensus mark of $485 million but fell short of our estimate of $681.7 million.
HIG’s total benefits and expenses inched up 0.9% year over year to $5,149 million, while our estimate for the metric stood at $$5,394 million.
Pretax income of $431 million slashed 26.1% year over year in the quarter under review and was below our estimate of $535 million.
Segmental Update
P&C
Commercial Lines
The segment’s revenues inched up marginally year over year to $2,934 million and outpaced the Zacks Consensus Estimate of $2,719 million. Core earnings of $363 million improved 6% year over year, thanks to rising earned premium and favorable prior-accident year development (PYD) included within core earnings. However, the metric lagged our estimate of $392.3 million.
The underlying combined ratio deteriorated 210 basis points (bps) year over year to 89.3% in the third quarter due to an elevation in the underlying loss and loss adjustment expense ratio.
Personal Lines
Revenues of $797 million slid 3% year over year in the third quarter and missed the consensus mark of $864 million. The segment incurred a core loss of $28 million against the prior-year quarter’s core earnings of $48 million. The metric was hampered by elevated P&C current accident year (CAY) catastrophe (CAT) losses and a decline in net investment income. The underlying combined ratio of 95.9% deteriorated 410 bps year over year due to higher CAY losses before CATs in auto and homeowners.
P&C Other Ops
The segment reported revenues of $10 million, which fell 58.3% year over year in the third quarter and lagged the consensus mark of $18 million.
Group Benefits
Segmental revenues dipped 0.2% year over year to $1,584 million in the quarter under review and beat the Zacks Consensus Estimate of $1,539 million. Core earnings increased to more than six-fold year over year to $117 million on the back of lower excess mortality losses. Improved fully-insured ongoing premiums stemming from solid persistency and sales, and increased exposure on existing accounts. Loss ratio of 72.8% improved 1,190 bps year over year, courtesy of a decline in excess mortality losses within group life.
Hartford Funds
Revenues amounted to $247 million, which dropped 19% year over year and fell short of the consensus mark of $280 million. Core earnings of $47 million fell 19% year over year and lagged our estimate of $75.3 million. Lower average assets under management (AUM) weakening fee income weighed on the bottom line. Daily average assets under management (AUM) of the segment dropped 16% year over year to $129.8 billion due to lower market values and net outflows.
Corporate
Operating revenues of $8 million plunged 52.9% year over year in the third quarter and missed the consensus mark of $15.21 million. Core loss of $38 million was narrower than the year-ago quarter’s loss of $47 million on the back of reduced interest expense and growing net investment income.
Financial Update (as of Sep 30, 2022)
Hartford Financial exited the third quarter with cash of $175 million, down 14.6% from the 2021-end level. Total investments of $50,661 million decreased 12.3% from the figure at 2021 end.
Total assets fell 6.2% from the 2021-end figure to $71,801 million.
Debt amounted to $4,356 million, down 11.9% from the figure as of Dec 31, 2021.
Total stockholders’ equity of $12,955 million dropped 27.4% from the level at 2021 end.
During the first nine months ended Sep 30, 2022, net cash provided by operating activities increased 1.2% from the prior-year comparable period’s level to $2,924 million.
Book value per diluted share came in at $38.99, which declined 23% year over year.
Core earnings’ return on equity during the trailing 12 months improved 180 bps year over year to 14.3%.
Share Repurchase and Dividend
Hartford Financial rewarded its shareholders with $476 million comprising share buybacks of $350 million and common dividends worth $126 million. HIG had $3.1 billion left under its buyback authorization as of Sep 30, 2022.
Management approved a 10% hike in its quarterly common dividend. The increased dividend amounting to 42.5 cents per share will be paid out on Jan 4, 2023, to its shareholders of record as of Dec 1, 2022.
Outlook
HIG hiked its expectation of cumulative savings that Hartford Next initiative is likely to bring this year. Earlier expected to be $540 million, management presently anticipates the initiative to fetch cumulative savings of $560 million. However, it reiterated the expectation of cumulative savings amounting to $625 million in 2023.
Of the insurance industry players that have reported third-quarter results so far, Arch Capital Group Ltd. (ACGL - Free Report) , Chubb Limited (CB - Free Report) and RLI Corporation (RLI - Free Report) beat the respective Zacks Consensus Estimate for earnings.
Arch Capital reported third-quarter 2022 operating income per share of 28 cents, which beat the Zacks Consensus Estimate by 16.7%. The bottom line, however, decreased 62.2% year over year. ACGL's gross premiums written improved 20.4% year over year to $3.9 billion. Net premiums written climbed 31.2% year over year to $2.7 billion on higher premiums written across its Insurance and Reinsurance segments. Net investment income increased 45.9% year over year to $128.6 million and beat our estimate of $94.2 million.
Chubb’s third-quarter 2022 core operating income of $3.17 per share outpaced the Zacks Consensus Estimate by 4.9%. The bottom line also improved 20.1% from the year-ago quarter’s figure. Net premiums written improved 14.4% year over year to $12 billion in the quarter. Adjusted net investment income of CB was a record $1.05 billion, up 12.1%.
RLI’s operating earnings of 50 cents per share beat the Zacks Consensus Estimate by 51.5% but declined 23.1% from the prior-year quarter’s level. Operating revenues of RLI were $312.7 million, up 15.3% year over year. The top line, however, missed the Zacks Consensus Estimate by 1.3%. RLI’s net investment income increased 19.2% year over year to $21.3 million.
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Hartford Financial (HIG) Beats on Q3 Earnings, Hikes Dividend
The Hartford Financial Services Group, Inc. (HIG - Free Report) reported third-quarter 2022 adjusted operating earnings of $1.44 per share, which outpaced the Zacks Consensus Estimate by 11.6%. The bottom line climbed 14% year over year.
Operating revenues of HIG amounted to $3,830 million, which rose 3.6% year over year in the quarter under review. The top line also beat the consensus mark by 1.8%.
The quarterly results benefited from an improved property and casualty (P&C) earned premium, higher Group Benefits fully-insured ongoing premium and reduced excess mortality losses within group life. However, the upside was partly offset by escalating insurance operating expenses, lower net investment income and elevated catastrophe losses stemming from Hurricane Ian.
The Hartford Financial Services Group, Inc. Price, Consensus and EPS Surprise
The Hartford Financial Services Group, Inc. price-consensus-eps-surprise-chart | The Hartford Financial Services Group, Inc. Quote
Q3 Operations
Total earned premiums improved 7.6% year over year to $4,910 million, which surpassed the Zacks Consensus Estimate of $4,811 million and our estimate of $4,808.2 million.
Net investment income of $487 million dropped 25.1% year over year in the third quarter due to a decline in income from limited partnerships and other alternative investments (LPs). The metric witnessed a year-over-year downtrend across Hartford Financial’s Commercial Lines, Personal Lines, P&C Other Ops and Group Benefits segments. The reported figure beat the consensus mark of $485 million but fell short of our estimate of $681.7 million.
HIG’s total benefits and expenses inched up 0.9% year over year to $5,149 million, while our estimate for the metric stood at $$5,394 million.
Pretax income of $431 million slashed 26.1% year over year in the quarter under review and was below our estimate of $535 million.
Segmental Update
P&C
Commercial Lines
The segment’s revenues inched up marginally year over year to $2,934 million and outpaced the Zacks Consensus Estimate of $2,719 million. Core earnings of $363 million improved 6% year over year, thanks to rising earned premium and favorable prior-accident year development (PYD) included within core earnings. However, the metric lagged our estimate of $392.3 million.
The underlying combined ratio deteriorated 210 basis points (bps) year over year to 89.3% in the third quarter due to an elevation in the underlying loss and loss adjustment expense ratio.
Personal Lines
Revenues of $797 million slid 3% year over year in the third quarter and missed the consensus mark of $864 million. The segment incurred a core loss of $28 million against the prior-year quarter’s core earnings of $48 million. The metric was hampered by elevated P&C current accident year (CAY) catastrophe (CAT) losses and a decline in net investment income. The underlying combined ratio of 95.9% deteriorated 410 bps year over year due to higher CAY losses before CATs in auto and homeowners.
P&C Other Ops
The segment reported revenues of $10 million, which fell 58.3% year over year in the third quarter and lagged the consensus mark of $18 million.
Group Benefits
Segmental revenues dipped 0.2% year over year to $1,584 million in the quarter under review and beat the Zacks Consensus Estimate of $1,539 million. Core earnings increased to more than six-fold year over year to $117 million on the back of lower excess mortality losses. Improved fully-insured ongoing premiums stemming from solid persistency and sales, and increased exposure on existing accounts. Loss ratio of 72.8% improved 1,190 bps year over year, courtesy of a decline in excess mortality losses within group life.
Hartford Funds
Revenues amounted to $247 million, which dropped 19% year over year and fell short of the consensus mark of $280 million. Core earnings of $47 million fell 19% year over year and lagged our estimate of $75.3 million. Lower average assets under management (AUM) weakening fee income weighed on the bottom line. Daily average assets under management (AUM) of the segment dropped 16% year over year to $129.8 billion due to lower market values and net outflows.
Corporate
Operating revenues of $8 million plunged 52.9% year over year in the third quarter and missed the consensus mark of $15.21 million. Core loss of $38 million was narrower than the year-ago quarter’s loss of $47 million on the back of reduced interest expense and growing net investment income.
Financial Update (as of Sep 30, 2022)
Hartford Financial exited the third quarter with cash of $175 million, down 14.6% from the 2021-end level. Total investments of $50,661 million decreased 12.3% from the figure at 2021 end.
Total assets fell 6.2% from the 2021-end figure to $71,801 million.
Debt amounted to $4,356 million, down 11.9% from the figure as of Dec 31, 2021.
Total stockholders’ equity of $12,955 million dropped 27.4% from the level at 2021 end.
During the first nine months ended Sep 30, 2022, net cash provided by operating activities increased 1.2% from the prior-year comparable period’s level to $2,924 million.
Book value per diluted share came in at $38.99, which declined 23% year over year.
Core earnings’ return on equity during the trailing 12 months improved 180 bps year over year to 14.3%.
Share Repurchase and Dividend
Hartford Financial rewarded its shareholders with $476 million comprising share buybacks of $350 million and common dividends worth $126 million. HIG had $3.1 billion left under its buyback authorization as of Sep 30, 2022.
Management approved a 10% hike in its quarterly common dividend. The increased dividend amounting to 42.5 cents per share will be paid out on Jan 4, 2023, to its shareholders of record as of Dec 1, 2022.
Outlook
HIG hiked its expectation of cumulative savings that Hartford Next initiative is likely to bring this year. Earlier expected to be $540 million, management presently anticipates the initiative to fetch cumulative savings of $560 million. However, it reiterated the expectation of cumulative savings amounting to $625 million in 2023.
Zacks Rank
Hartford Financial currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performances of Some Other Insurers
Of the insurance industry players that have reported third-quarter results so far, Arch Capital Group Ltd. (ACGL - Free Report) , Chubb Limited (CB - Free Report) and RLI Corporation (RLI - Free Report) beat the respective Zacks Consensus Estimate for earnings.
Arch Capital reported third-quarter 2022 operating income per share of 28 cents, which beat the Zacks Consensus Estimate by 16.7%. The bottom line, however, decreased 62.2% year over year. ACGL's gross premiums written improved 20.4% year over year to $3.9 billion. Net premiums written climbed 31.2% year over year to $2.7 billion on higher premiums written across its Insurance and Reinsurance segments. Net investment income increased 45.9% year over year to $128.6 million and beat our estimate of $94.2 million.
Chubb’s third-quarter 2022 core operating income of $3.17 per share outpaced the Zacks Consensus Estimate by 4.9%. The bottom line also improved 20.1% from the year-ago quarter’s figure. Net premiums written improved 14.4% year over year to $12 billion in the quarter. Adjusted net investment income of CB was a record $1.05 billion, up 12.1%.
RLI’s operating earnings of 50 cents per share beat the Zacks Consensus Estimate by 51.5% but declined 23.1% from the prior-year quarter’s level. Operating revenues of RLI were $312.7 million, up 15.3% year over year. The top line, however, missed the Zacks Consensus Estimate by 1.3%. RLI’s net investment income increased 19.2% year over year to $21.3 million.