Tags: hartford | profit | falls | compensation

Hartford Financial Profit Falls 79% on Workers’ Compensation

Tuesday, 07 February 2012 04:46 PM

Hartford Financial Services Group Inc., the seller of life insurance and property-casualty coverage, said fourth-quarter profit fell 79 percent after the company underestimated claims costs.

Net income declined to $127 million, or 24 cents a share, from $619 million, or $1.24, a year earlier, according to a statement today from Hartford. Excluding some investment results, profit was 69 cents a share, beating the 60 cent estimate of 16 analysts surveyed by Bloomberg.

Chief Executive Officer Liam McGee, 57, is adding to reserves after claims costs on workers’ compensation policies were higher than the company expected. Hartford, based in the Connecticut city of the same name, is cutting jobs and buying back stock to boost returns for shareholders.

“Reserves for workers’ compensation continue to be problematic,” Jay Gelb, an analyst with Barclays Plc, said last month in a research report. Gelb has an “equal weight” rating on the stock.

Hartford has gained 18 percent since Dec. 31 in New York trading. The insurer, which repaid a $3.4 billion U.S. bailout in 2010, fell 39 percent last year. Fourth-quarter results were released after the close of regular trading today.

Hartford sells savings products and life insurance policies that compete with the offerings of firms like MetLife Inc. and Prudential Financial Inc. Hartford’s rivals in the property- casualty market include Travelers Cos. and Berkshire Hathaway Inc.’s car-insurance unit Geico Corp.

Book Value

Hartford stock trades at less than half of the company’s book value, a measure of assets minus liabilities. That compares with about .7 times for MetLife and 1 for Travelers, both based in New York.

Hartford counts John Paulson’s hedge fund as its largest shareholder, with a stake of more than 8 percent as of Sept. 30, according to data compiled by Bloomberg. Allianz SE, Germany’s biggest insurer, has a stake of more than 5 percent after injecting capital into Hartford at the depths of the financial crisis in 2008.

McGee, hired in 2009 after a career at Bank of America Corp., sold stock and debt in 2010 to repay Hartford’s government rescue. The insurer, which posted losses of more than $4 billion in the five quarters prior to McGee’s arrival, reported net income of $535 million in the nine months ended Sept. 30. Hartford may repurchase $500 million of shares, the company said in August.

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Tuesday, 07 February 2012 04:46 PM
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