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Hartford Profit Jumps as CEO Shifts Focus

Monday, 28 October 2013 05:18 PM

Hartford Financial Services Group Inc.’s profit surged as the insurer focused on property-and-casualty coverage after divesting life and annuity units. The company's shares gained in extended trading.

Third-quarter net income advanced to $293 million, or 60 cents a share, from $13 million, or 1 cent, a year earlier, when the sale of a life-insurance unit weighed on results, Hartford said Monday in a statement. Profit excluding some investing results was $1.03 a share, beating the 83-cent average estimate of 17 analysts surveyed by Bloomberg.

Chief Executive Officer Liam McGee sold the life unit and a broker-dealer and retreated from variable annuities amid pressure from investors including John Paulson to narrow the company’s focus. Hartford, based in the Connecticut city of the same name, has rallied 51 percent this year, driven by rising interest rates and higher stock prices.

“There is a lot of confidence now in Hartford executing what they’ve set out to do,” Vincent DeAugustino, an analyst at Keefe, Bruyette & Woods, said by phone before results were announced. “Within the foreseeable horizon, we can think about Hartford as being a mostly pure-play P&C company.”

Hartford advanced 1 percent to $33.90 at the close in New York and has beaten the 24 percent gain of the Standard & Poor’s 500 Index this year. The stock added 55 cents to $34.45 at 4:39 p.m., after results were released.

Catastrophe Costs

Core earnings in the property-casualty unit were $263 million, a 4.4 percent decrease from a year earlier, as costs tied to natural disasters rose. Hartford spent 96 cents on claims and expenses for every premium dollar it collected, one penny more than in the year-earlier period. Catastrophes cost the firm $66 million, up from $10 million a year earlier.

In the commercial segment, policy sales rose 1 percent to $1.57 billion. Sales advanced 2.9 percent to $988 million in the consumer unit, Hartford said. Rates increased 8 percent on standard commercial policies that were renewed, according to today’s statement, the same pace as a year earlier.

Hartford said improved group long-term disability results contributed to a 57 percent increase in core earnings at the unit that provides workplace benefits, to $36 million.

The insurer initially reported a larger profit for last year’s third quarter, before finding a material weakness in internal controls over financial reporting and correcting the results. The loss was tied to the sale of a life unit to Prudential Financial Inc.

Unit Sales

McGee also divested its retirement-plans business, broker- dealer, and individual annuity origination unit, the company said in January.

Hartford still has liabilities tied to retirement products sold before exiting the variable-annuity business in the U.S. and Japan. McGee, 59, used hedges against market fluctuations on the products, which can guarantee minimum payouts regardless of the performance of assets backing the policies. Liabilities typically shrink as stock markets rise.

Book value, a measure of assets minus liabilities, rose to $38.87 a share from $38.59 three months earlier.

The firm reached a deal in June to sell its U.K. variable- annuity business to Berkshire Hathaway Inc. for $285 million as Hartford sought to limit liabilities.

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Hartford Financial Services Group Inc.'s profit surged as the insurer focused on property-and-casualty coverage after divesting life and annuity units.
Monday, 28 October 2013 05:18 PM
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