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Hartford Financial Services Group Inc.'s new Chairman and Chief Executive Officer Liam E. McGee said the company's third-quarter results -- a net loss of $220 million -- are a sign the insurer is "emerging from the challenges of the last 18 months."
This compared with a net loss during the same time last year of $2.63 billion. The company, which posted a $2.75 billion loss for 2008, needed $3.4 billion in bailout funds from the Troubled Asset Relief Program's Capital Purchase Program to stabilize finances.
Net unrealized investment losses were $5.8 billion as of Sept. 30, compared with $13.2 billion as of Dec. 31, 2008, Hartford said. Net investment income pretax was $1 billion in the third quarter -- a 5% decline from the same time a year ago. In the third quarter, Hartford recorded $536 million in impairments -- a majority of which are related to potential future credit losses.
McGee, hired a month ago from Bank of America Corp., said during a conference call held to discuss the earnings, that over the past month an investment team "has accelerated its work to optimize the management of these particular asset classes." The CEO said he has spent his time "diving head first" into Hartford's operations. The company, he said, must face the potential of another downturn in the economy and equity and credit markets but Hartford's "operating franchises are stable and performing well." He added the company has a "strong capital foundation."
Core earnings, which includes financial measures not calculated based on generally accepted accounting principles, were $660 million during the third quarter, compared with a $422 million loss during the third quarter last year. "New business indicators are showing stabilization or sequential improvement," McGee said. "Core earnings remain strong due to our disciplined pricing and risk selection."
As more examples of the "resiliency" of Hartford, McGee cited the company's strong distribution relationships and its committed employees. McGee said he recently attended a meeting with the Council of Insurance Agents and Brokers and "came away knowing our partners want to do business with us. In fact, many want to do more business with us."
"There are opportunities to win more of their business and deepen our relationships," McGee said.
Premiums written for the third quarter in small- and middle-market commercial lines dropped slightly to $626 million and $496 million, compared with $652 million and $571 million, respectively. Small commercial did increase new business premium 20%. Personal lines written premiums increased 2% this quarter, compared with the same time last year. McGee said the company increased policy count in automobile and home segments.
Excluding catastrophes, the combined ratio for property/casualty operations rose to 93.8, compared with 91.8 last year. In personal lines, the ratio increased to 94.5 from 88.3, comparing the same period year-to-year, due to reserve strengthening to address an increase in auto frequency and lower average premium. In addition, 9.1 points were added to the combined ratio from weather-related losses from hail and windstorms in the Midwest and Colorado.
Life operations reported a net loss of $323 million during the third quarter, compared with a $1.8 billion loss last year at the same time. Variable annuity deposits were $622 million, compared with $1.9 billion in the third quarter in 2008, due primarily to Hartford's "product feature and pricing changes," the company said. Due to the economy and competition, group benefits sales were $122 million in the third quarter, compared with $158 million during the same time last year, but the segment reported a net income of $65 million, compared with a net loss of $186 million a year ago during the third quarter, Hartford said.
Members of the Hartford Insurance Group have a current Best's Financial Strength Ratings of A (Excellent).
In afternoon trading on Nov. 4, shares of Hartford Financial Services Group Inc. (NYSE: HIG) stock were selling at $24.64, down 4.53% from the previous close.
(By Chad Hemenway, associate editor, BestWeek: Chad.Hemenway@ambest.com)
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