The Hartford Announces Excellent Third Quarter 2024 Financial Performance
Increased quarterly common dividend per share by 11%
-
Third quarter 2024 net income available to common stockholders of
$761 million ($2.56 per diluted share) increased 18% from$645 million ($2.09 per diluted share) over the same period in 2023. Core earnings* of$752 million ($2.53 core earnings per diluted share*) increased 6% from$708 million ($2.29 core earnings per diluted share) over the same period in 2023. - Net income ROE for the trailing 12 months of 20.0% and core earnings ROE* of 17.4%.
- Property & Casualty (P&C) written premiums rose 10% in third quarter 2024, driven by Commercial Lines and Personal Lines premium growth of 9% and 12%, respectively.
- Commercial Lines third quarter combined ratio of 92.2 and underlying combined ratio* of 88.6.
-
P&C current accident year (CAY) catastrophe (CAT) losses in third quarter 2024 of
$247 million , before tax, including losses from Hurricane Helene of$104 million . - Group Benefits third quarter net income margin of 8.8% and core earnings margin* of 8.7%.
-
Returned
$538 million to stockholders in the third quarter, including$400 million of shares repurchased and$138 million in common stockholder dividends paid. Increased the quarterly common dividend per share by 11%, to$0.52 , payableJan. 3, 2025 to shareholders of record at the close of business onDec. 2, 2024 .
* Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP); definitions of non-GAAP measures and reconciliations to their closest GAAP measures can be found in this news release under the heading Discussion of Non-GAAP Financial Measures.
** All amounts and percentages set forth in this news release are approximate unless otherwise noted.
"The
The
Swift continued, “The Hartford’s performance through the first nine months of 2024 is a powerful example of sustained financial excellence even in the face of industry-wide elevated catastrophe losses. With strong capital generation, we are pleased to announce an 11 percent increase in our quarterly common dividend. Our franchise has never been better positioned to sustain industry-leading financial performance and create value for all our stakeholders.”
CONSOLIDATED RESULTS:
|
Three Months Ended |
||
($ in millions except per share data) |
|
|
Change |
Net income available to common stockholders |
|
|
18% |
Net income available to common stockholders per diluted share1 |
|
|
22% |
|
|
|
|
Core earnings |
|
|
6% |
Core earnings per diluted share |
|
|
10% |
|
|
|
|
Book value per diluted share |
|
|
30% |
Book value per diluted share (ex. accumulated other comprehensive income (AOCI))2 |
|
|
11% |
|
|
|
|
Net income available to common stockholders' return on equity (ROE)3, last 12-months |
20.0% |
17.7% |
2.3 |
Core earnings ROE3, last 12-months |
17.4% |
14.9% |
2.5 |
[1] Includes dilutive potential common shares; for net income available to common stockholders per diluted share, the numerator is net income less preferred dividends
|
Third quarter 2024 net income available to common stockholders of
Third quarter 2024 core earnings of
- An increase in earnings generated by 11% growth in P&C earned premium.
-
Net investment income of
$659 million , before tax, compared with$597 million in third quarter 2023, primarily driven by higher yields on our fixed income portfolio and a higher level of invested assets. - Personal Lines loss and loss adjustment expense ratio of 76.8 improved 6.9 points compared with 83.7 in third quarter 2023, including a change from unfavorable PYD of 0.1 points in 2023 to favorable PYD of 1.6 points in 2024 and 1.6 points of higher CATs. Underlying loss and loss adjustment expense ratio* of 68.0 improved 6.7 points from third quarter 2023, largely due to the impact of earned pricing increases, lower frequency in auto physical damage and lower frequency in homeowners.
- Group Benefits loss ratio of 70.2 was flat with third quarter 2023, primarily driven by a lower group life loss ratio offset by a higher disability loss ratio, as well as a higher loss ratio on supplemental health products.
-
P&C CAY CAT losses of
$247 million , before tax, in third quarter 2024, primarily driven by hurricane losses, including$104 million from Hurricane Helene, compared withCAY CAT losses of$184 million in third quarter 2023. - Commercial Lines loss and loss adjustment expense ratio of 61.0 compared with 58.9 in third quarter 2023, including 0.5 points of less favorable PYD and 0.9 points of higher CATs. Underlying loss and loss adjustment expense ratio of 57.3 compared with 56.6 in third quarter 2023, with the increase largely due a higher general liability loss ratio, partially offset by lower non-CAT property losses.
-
Net favorable prior accident year development (PYD) in core earnings of
$24 million , before tax, in 2024 compared with net favorable PYD of$43 million in core earnings in 2023. Net favorable PYD in third quarter 2024 primarily included reserve reductions in workers’ compensation and personal auto physical damage, partially offset by reserve increases in general liability and commercial auto liability. - The expense ratios increased across P&C and Group Benefits from third quarter 2023, primarily driven by higher incentive compensation and benefits costs, and higher marketing spend in Personal Lines.
Book value per diluted share (excluding AOCI) of
Net income available to common stockholders' ROE (net income ROE) for the 12-month period ending
Core earnings ROE for the 12-month period ending
BUSINESS RESULTS:
Commercial Lines
|
Three Months Ended |
||
($ in millions, unless otherwise noted) |
|
|
Change |
Net income |
|
|
2% |
Core earnings |
|
|
(1%) |
Written premiums |
|
|
9% |
Underwriting gain1 |
|
|
(13%) |
Underlying underwriting gain1 |
|
|
4% |
Losses and loss adjustment expense ratio |
|
|
|
Current accident year before catastrophes |
57.3 |
56.6 |
0.7 |
Current accident year catastrophes |
4.8 |
3.9 |
0.9 |
Favorable prior accident year development |
(1.1) |
(1.6) |
0.5 |
Expenses |
30.9 |
30.7 |
0.2 |
Policyholder dividends |
0.3 |
0.5 |
(0.2) |
Combined ratio |
92.2 |
90.2 |
2.0 |
Impact of catastrophes and PYD on combined ratio |
(3.7) |
(2.3) |
(1.4) |
Underlying combined ratio |
88.6 |
87.8 |
0.8 |
[1] Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP); definitions of non-GAAP measures and reconciliations to their closest GAAP measures can be found in this news release under the heading Discussion of Non-GAAP Financial Measures |
Third quarter 2024 net income of
Commercial Lines core earnings of
- 10% growth in earned premium.
-
Net investment income of
$442 million , before tax, compared with$395 million in third quarter 2023. -
CAY CAT losses of$155 million , before tax, in third quarter 2024, primarily from hurricanes and tropical storms, including$55 million from Hurricane Helene, as well as wind and hail events across several regions ofthe United States , up fromCAY CAT losses of$115 million in third quarter 2023. - An underlying loss and loss adjustment expense ratio of 57.3, in third quarter 2024 compared with 56.6 in third quarter 2023, with the increase primarily driven by a higher general liability loss ratio, partially offset by lower non-CAT property losses.
-
Net favorable PYD within core earnings of
$10 million , before tax, in third quarter 2024, compared with$46 million of net favorable PYD within core earnings in third quarter 2023. The net favorable PYD in third quarter 2024 primarily includes reserve reductions in workers’ compensation, partially offset by reserve increases in general liability and auto liability.
Combined ratio of 92.2 compared with 90.2 in third quarter 2023, primarily due to a 2.1 point increase in the loss and loss adjustment expense ratio, including 0.5 points of less favorable PYD (including 0.8 points of favorable development related to the amortization of the deferred gain) and 0.9 points of higher
- Small Commercial combined ratio of 91.6 compared with 87.7 in third quarter 2023, including 3.2 points of higher CAY CATs and 1.1 points of less favorable PYD. Underlying combined ratio of 89.3 improved 0.4 points compared with 89.7 in third quarter 2023, primarily due to lower non-CAT property losses, partially offset by a higher loss ratio in general liability.
- Middle & Large Commercial combined ratio of 97.0 compared with 94.5 in third quarter 2023, driven by 1.5 points of more unfavorable PYD, partially offset by 1.0 points of lower CAY CATs. Underlying combined ratio of 90.2 compared with 88.1 in third quarter 2023, primarily due to higher non-CAT property losses and a higher loss ratio in general liability and auto, partially offset by a lower expense ratio and the benefit of a shift in premium mix toward property lines.
- Global Specialty combined ratio of 87.4 improved 1.5 points compared with 88.9 in third quarter 2023, driven by a change from unfavorable PYD of 0.3 in 2023 to favorable PYD of 1.7 points in 2024 and 0.5 points of lower CAY CATs. The combined ratio included 2.9 points of favorable development due to the amortization of the deferred gain related to the Navigators ADC. Underlying combined ratio of 85.3 compared with 84.3 in third quarter 2023, primarily due to a higher loss ratio in global reinsurance and a higher expense ratio.
Third quarter 2024 written premiums of
Personal Lines
|
Three Months Ended |
||
($ in millions, unless otherwise noted) |
|
|
Change |
Net income (loss) |
|
|
NM |
Core earnings (loss) |
|
|
NM |
Written premiums |
|
|
12% |
Underwriting loss |
|
|
65% |
Underlying underwriting gain |
|
|
NM |
Losses and loss adjustment expense ratio |
|
|
|
Current accident year before catastrophes |
68.0 |
74.7 |
(6.7) |
Current accident year catastrophes |
10.4 |
8.8 |
1.6 |
Favorable prior accident year development |
(1.6) |
0.1 |
(1.7) |
Expenses |
25.6 |
24.2 |
1.4 |
Combined ratio |
102.5 |
107.9 |
(5.4) |
Impact of catastrophes and PYD on combined ratio |
(8.8) |
(8.9) |
0.1 |
Underlying combined ratio |
93.7 |
99.0 |
(5.3) |
Net income of
Personal Lines core earnings of
- An underlying loss and loss adjustment expense ratio of 68.0 in third quarter 2024, which improved 6.7 points from 74.7 in third quarter 2023, primarily driven by the impact of earned pricing increases and improvement in auto physical damage frequency and homeowners frequency.
- 13% growth in earned premium.
-
$14 million , before tax, of favorable PYD in third quarter of 2024, compared with$1 million of unfavorable PYD in third quarter 2023. The net favorable PYD in third quarter 2024 is driven by reserve reductions in auto physical damage and homeowners. -
Net investment income of
$58 million , before tax, in third quarter 2024 compared with$47 million in third quarter 2023. -
CAY CAT losses of$92 million , before tax, in third quarter 2024, primarily from hurricanes and tropical storms, including$49 million from Hurricane Helene, as well as wind and hail events across several regions ofthe United States , up from$69 million ofCAY CAT losses in third quarter 2023.
Combined ratio of 102.5 in third quarter 2024, improved from 107.9 in third quarter 2023, primarily due to a 6.9 point improvement in the loss and loss adjustment expense ratio, including a 6.7 point improvement in the underlying loss and loss adjustment expense ratio and a change from unfavorable PYD of 0.1 points in 2023 to favorable PYD of 1.6 points in 2024, partially offset by 1.6 points of higher
- Auto combined ratio of 105.7 improved from 110.8 in third quarter 2023. The underlying combined ratio of 101.5 improved 7.0 points from 108.5 in third quarter 2023, primarily due to improvement in underlying loss and loss adjustment expense ratio driven by the impact of double-digit earned pricing increases as well as lower physical damage claim frequency, partially offset by higher auto claim severities. The auto physical damage claim severity trend has moderated from the prior year. The auto liability severity increases continue to recognize the inflationary effects and higher attorney representation rates on bodily injury claims.
- Homeowners combined ratio of 94.7 improved from 101.4 in third quarter 2023. The underlying combined ratio of 75.4 improved 2.7 points from 78.1 in third quarter 2023, primarily due to improvement in underlying loss and loss adjustment expense ratio driven by the impact of double-digit earned pricing and lower claim frequency, partially offset by higher claim severities. Contributing to the higher homeowners severity was the effect of higher rebuilding costs.
- The expense ratio of 25.6 increased 1.4 points from third quarter 2023, primarily driven by higher direct marketing costs, higher commissions, and higher incentive compensation, partially offset by the impact of higher earned premium.
Written premiums in third quarter 2024 were
- Renewal written price increases in auto and homeowners of 20.8% and 15.2%, respectively, in response to elevated loss cost trends.
-
An increase in new business in both homeowners and auto from third quarter 2023 of
$35 million , or 140%, and$22 million , or 36%, respectively. - Lower effective policy count retention in auto due to renewal written price increases.
Group Benefits
|
Three Months Ended |
||
($ in millions, unless otherwise noted) |
|
|
Change |
Net income |
|
|
7% |
Core earnings |
|
|
(9%) |
Fully insured ongoing premiums |
|
|
2% |
Loss ratio |
70.2% |
70.2% |
0.0 |
Expense ratio |
25.3% |
24.0% |
1.3 |
Net income margin |
8.8% |
8.5% |
0.3 |
Core earnings margin |
8.7% |
9.8% |
(1.1) |
Net income of
Fully insured ongoing premiums were up 2% compared with third quarter 2023, including an increase in exposure on existing accounts, new business sales, and persistency in excess of 90%, though slightly below the prior year period. Fully insured ongoing sales were
Loss ratio of 70.2 was flat with third quarter 2023.
- Group life loss ratio of 77.5 improved 2.7 points largely driven by lower mortality.
- Group disability loss ratio of 67.9 compared with 67.3 in third quarter 2023, driven by a higher loss ratio in paid family and medical leave products, partially offset by a favorable change in the long-term disability recovery rate assumption of 2.2 points.
Expense ratio of 25.3 compared with 24.0 in third quarter 2023, primarily due to higher staffing costs, including higher incentive compensation and benefits costs, and increased investments in technology.
Net investment income of
Hartford Funds
|
Three Months Ended |
||
($ in millions, unless otherwise noted) |
|
|
Change |
Net income |
|
|
32% |
Core earnings |
|
|
4% |
Daily average Hartford Funds AUM |
|
|
7% |
Mutual Funds and exchange-traded funds (ETF) net flows |
|
|
74% |
Total Hartford Funds AUM |
|
|
16% |
Third quarter 2024 net income of
Core earnings of
Daily average AUM of
Mutual fund and ETF net outflows totaled
Corporate
|
Three Months Ended |
||
($ in millions, unless otherwise noted) |
|
|
Change |
Net loss |
|
|
77% |
Net loss available to common stockholders |
|
|
69% |
Core loss |
|
|
50% |
Net investment income, before tax |
|
|
42% |
Interest expense and preferred dividends, before tax |
|
|
(2)% |
Net loss available to common stockholders of
Third quarter 2024 core loss of
INVESTMENT INCOME AND PORTFOLIO DATA:
|
Three Months Ended |
||
($ in millions, unless otherwise noted) |
|
|
Change |
Net investment income, before tax |
|
|
10% |
Annualized investment yield, before tax |
4.4% |
4.2% |
0.2 |
Annualized investment yield, before tax, excluding LPs1 |
4.5% |
4.1% |
0.4 |
Annualized LP yield, before tax |
3.0% |
6.3% |
(3.3) |
Annualized investment yield, after tax |
3.5% |
3.4% |
0.1 |
[1] Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP); definitions of non-GAAP measures and reconciliations to their closest GAAP measures can be found in this news release under the heading Discussion of Non-GAAP Financial Measures |
Third quarter 2024 consolidated net investment income of
Third quarter 2024 net investment income, excluding LPs*, of
Third quarter 2024 included
Net realized losses of
Total invested assets of
CONFERENCE CALL
The
More detailed financial information can be found in The
About The
The
HIG-F
From time to time, The
|
||||||||||||||||||||||
CONSOLIDATING INCOME STATEMENTS |
||||||||||||||||||||||
Three Months Ended |
||||||||||||||||||||||
($ in millions) |
||||||||||||||||||||||
|
Commercial Lines |
Personal Lines |
P&C Other Ops |
Group Benefits |
Hartford Funds |
Corporate |
|
Consolidated |
||||||||||||||
Earned premiums |
$ |
3,249 |
|
$ |
885 |
|
$ |
— |
|
$ |
1,600 |
|
$ |
— |
|
$ |
— |
|
|
$ |
5,734 |
|
Fee income |
|
11 |
|
|
8 |
|
|
— |
|
|
55 |
|
|
263 |
|
|
10 |
|
|
|
347 |
|
Net investment income |
|
442 |
|
|
58 |
|
|
18 |
|
119 |
|
|
5 |
|
|
17 |
|
|
|
659 |
|
|
Net realized gains (losses) |
|
(32 |
) |
|
(2 |
) |
|
— |
|
|
— |
|
|
7 |
|
|
14 |
|
|
|
(13 |
) |
Other revenue |
|
1 |
|
|
22 |
|
|
— |
|
|
— |
|
|
— |
|
|
1 |
|
|
|
24 |
|
Total revenues |
|
3,671 |
|
|
971 |
|
|
18 |
|
|
1,774 |
|
|
275 |
|
|
42 |
|
|
|
6,751 |
|
Benefits, losses, and loss adjustment expenses |
|
1,981 |
|
|
680 |
|
|
— |
|
|
1,161 |
|
|
— |
|
|
1 |
|
|
|
3,823 |
|
Amortization of DAC |
|
512 |
|
|
65 |
|
|
— |
|
|
8 |
|
|
— |
|
|
— |
|
|
|
585 |
|
Insurance operating costs and other expenses |
|
509 |
|
|
186 |
|
|
7 |
|
|
401 |
|
|
208 |
|
|
12 |
|
|
|
1,323 |
|
Restructuring and other costs |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1 |
|
|
|
1 |
|
Interest expense |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
49 |
|
|
|
49 |
|
Amortization of other intangible assets |
|
7 |
|
|
1 |
|
|
— |
|
|
10 |
|
|
— |
|
|
— |
|
|
|
18 |
|
Total benefits, losses and expenses |
|
3,009 |
|
|
932 |
|
|
7 |
|
|
1,580 |
|
|
208 |
|
|
63 |
|
|
|
5,799 |
|
Income (loss) before income taxes |
|
662 |
|
|
39 |
|
|
11 |
|
|
194 |
|
|
67 |
|
|
(21 |
) |
|
|
952 |
|
Income tax expense (benefit) |
|
134 |
|
|
8 |
|
|
1 |
|
|
38 |
|
|
13 |
|
|
(9 |
) |
|
|
185 |
|
Net income (loss) |
|
528 |
|
|
31 |
|
|
10 |
|
|
156 |
|
|
54 |
|
|
(12 |
) |
|
|
767 |
|
Preferred stock dividends |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
6 |
|
|
|
6 |
|
Net income (loss) available to common stockholders |
|
528 |
|
|
31 |
|
|
10 |
|
|
156 |
|
|
54 |
|
|
(18 |
) |
|
|
761 |
|
Adjustments to reconcile net income (loss) available to common stockholders to core earnings (loss) |
|
|
|
|
|
|
|
|
||||||||||||||
Net realized losses (gains), excluded from core earnings, before tax |
|
31 |
|
|
2 |
|
|
— |
|
|
(1 |
) |
|
(7 |
) |
|
(13 |
) |
|
|
12 |
|
Restructuring and other costs, before tax |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1 |
|
|
|
1 |
|
Integration and other non-recurring M&A costs, before tax |
|
2 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
2 |
|
Change in deferred gain on retroactive reinsurance, before tax |
|
(26 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
(26 |
) |
Income tax expense (benefit) |
|
(1 |
) |
|
— |
|
|
— |
|
|
(1 |
) |
|
— |
|
|
4 |
|
|
|
2 |
|
Core earnings (loss) |
$ |
534 |
|
$ |
33 |
|
$ |
10 |
|
$ |
154 |
|
$ |
47 |
|
$ |
(26 |
) |
|
$ |
752 |
|
|
||||||||||||||||||||||
CONSOLIDATING INCOME STATEMENTS |
||||||||||||||||||||||
Three Months Ended |
||||||||||||||||||||||
($ in millions) |
||||||||||||||||||||||
|
Commercial Lines |
Personal Lines |
P&C Other Ops |
Group Benefits |
Hartford Funds |
Corporate |
|
Consolidated |
||||||||||||||
Earned premiums |
$ |
2,951 |
|
$ |
784 |
|
$ |
— |
|
$ |
1,575 |
|
$ |
— |
|
$ |
— |
|
|
$ |
5,310 |
|
Fee income |
|
11 |
|
|
7 |
|
|
— |
|
|
54 |
|
|
248 |
|
|
10 |
|
|
|
330 |
|
Net investment income |
|
395 |
|
|
47 |
|
|
18 |
|
|
121 |
|
|
4 |
|
|
12 |
|
|
|
597 |
|
Net realized losses |
|
(38 |
) |
|
(5 |
) |
|
(2 |
) |
|
(31 |
) |
|
(4 |
) |
|
(10 |
) |
|
|
(90 |
) |
Other revenue (loss) |
|
(1 |
) |
|
21 |
|
|
— |
|
|
— |
|
|
— |
|
|
1 |
|
|
|
21 |
|
Total revenues |
|
3,318 |
|
|
854 |
|
|
16 |
|
|
1,719 |
|
|
248 |
|
|
13 |
|
|
|
6,168 |
|
Benefits, losses, and loss adjustment expenses |
|
1,738 |
|
|
656 |
|
|
2 |
|
|
1,146 |
|
|
— |
|
|
1 |
|
|
|
3,543 |
|
Amortization of DAC |
|
451 |
|
|
58 |
|
|
— |
|
|
8 |
|
|
— |
|
|
— |
|
|
|
517 |
|
Insurance operating costs and other expenses |
|
473 |
|
|
156 |
|
|
3 |
|
|
372 |
|
|
195 |
|
|
27 |
|
|
|
1,226 |
|
Restructuring and other costs |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1 |
|
|
|
1 |
|
Interest expense |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
50 |
|
|
|
50 |
|
Amortization of other intangible assets |
|
7 |
|
|
1 |
|
|
— |
|
|
10 |
|
|
— |
|
|
— |
|
|
|
18 |
|
Total benefits, losses and expenses |
|
2,669 |
|
|
871 |
|
|
5 |
|
|
1,536 |
|
|
195 |
|
|
79 |
|
|
|
5,355 |
|
Income (loss) before income taxes |
|
649 |
|
|
(17 |
) |
|
11 |
|
|
183 |
|
|
53 |
|
|
(66 |
) |
|
|
813 |
|
Income tax expense (benefit) |
|
130 |
|
|
(5 |
) |
|
2 |
|
|
37 |
|
|
12 |
|
|
(14 |
) |
|
|
162 |
|
Net income (loss) |
|
519 |
|
|
(12 |
) |
|
9 |
|
|
146 |
|
|
41 |
|
|
(52 |
) |
|
|
651 |
|
Preferred stock dividends |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
6 |
|
|
|
6 |
|
Net income (loss) available to common stockholders |
|
519 |
|
|
(12 |
) |
|
9 |
|
|
146 |
|
|
41 |
|
|
(58 |
) |
|
|
645 |
|
Adjustments to reconcile net income (loss) available to common stockholders to core earnings (loss) |
|
|
|
|
|
|
|
|
||||||||||||||
Net realized losses, excluded from core earnings, before tax |
|
29 |
|
|
5 |
|
|
1 |
|
|
28 |
|
|
4 |
|
|
9 |
|
|
|
76 |
|
Restructuring and other costs |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1 |
|
|
|
1 |
|
Integration and other non-recurring M&A costs, before tax |
|
1 |
|
|
— |
|
|
— |
|
|
1 |
|
|
— |
|
|
— |
|
|
|
2 |
|
Income tax expense (benefit) |
|
(7 |
) |
|
(1 |
) |
|
1 |
|
|
(5 |
) |
|
— |
|
|
(4 |
) |
|
|
(16 |
) |
Core earnings (loss) |
$ |
542 |
|
$ |
(8 |
) |
$ |
11 |
|
$ |
170 |
|
$ |
45 |
|
$ |
(52 |
) |
|
$ |
708 |
|
The
DISCUSSION OF NON-GAAP FINANCIAL MEASURES
The
Annualized investment yield, excluding limited partnerships and other alternative investments
- This non-GAAP measure is calculated as (a) the annualized net investment income, on a Consolidated, P&C or Group Benefits level, excluding limited partnerships and other alternative investments, divided by (b) the monthly average invested assets at amortized cost, as applicable, excluding derivatives book value and limited partnerships and other alternative investments. The Company believes that annualized investment yield, excluding limited partnerships and other alternative investments, provides investors with an important measure of the trend in investment earnings because it excludes the impact of the volatility in returns related to limited partnerships and other alternative investments. Annualized investment yield is the most directly comparable GAAP measure. A reconciliation of the annualized investment yield to annualized investment yield excluding limited partnerships and other alternatives investments for the quarterly periods ended
Three Months Ended |
||||
|
|
|
||
|
Consolidated |
|||
Annualized investment yield |
4.4 |
% |
4.2 |
% |
Adjustment for income from limited partnerships and other alternative investments |
0.1 |
% |
(0.1 |
)% |
Annualized investment yield excluding limited partnerships and other alternative investments |
4.5 |
% |
4.1 |
% |
Book value per diluted share (excluding AOCI)
- This is a non-GAAP per share measure that is calculated by dividing (a) common stockholders' equity, excluding AOCI, after tax, by (b) common shares outstanding and dilutive potential common shares. The Company provides this measure to enable investors to analyze the amount of the Company's net worth that is primarily attributable to the Company's business operations. The Company believes that excluding AOCI from the numerator is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period, primarily based on changes in interest rates. Book value per diluted share is the most directly comparable
|
As of |
|||||||
|
|
|
Change |
|||||
Book value per diluted share |
$ |
56.39 |
|
$ |
49.43 |
|
14.1 |
% |
Per diluted share impact of AOCI |
$ |
6.78 |
$ |
9.40 |
(27.9 |
%) |
||
Book value per diluted share (excluding AOCI) |
$ |
63.17 |
|
$ |
58.83 |
|
7.4 |
% |
|
As of |
|||||||
|
|
|
Change |
|||||
Book value per diluted share |
$ |
56.39 |
|
$ |
43.50 |
|
29.6 |
% |
Per diluted share impact of AOCI |
$ |
6.78 |
$ |
13.62 |
(50.2 |
%) |
||
Book value per diluted share (excluding AOCI) |
$ |
63.17 |
|
$ |
57.12 |
|
10.6 |
% |
Core earnings - The
-
Certain realized gains and losses - Generally realized gains and losses are primarily driven by investment decisions and external economic developments, the nature and timing of which are unrelated to the insurance and underwriting aspects of our business. Accordingly, core earnings excludes the effect of all realized gains and losses that tend to be highly variable from period to period based on capital market conditions. The
Hartford believes, however, that some realized gains and losses are integrally related to our insurance operations, so core earnings includes net realized gains and losses such as net periodic settlements on credit derivatives. These net realized gains and losses are directly related to an offsetting item included in the income statement such as net investment income. - Restructuring and other costs - Costs incurred as part of a restructuring plan are not a recurring operating expense of the business.
- Loss on extinguishment of debt - Largely consisting of make-whole payments or tender premiums upon paying debt off before maturity, these losses are not a recurring operating expense of the business.
- Gains and losses on reinsurance transactions - Gains or losses on reinsurance, such as those entered into upon sale of a business or to reinsure loss reserves, are not a recurring operating expense of the business.
- Integration and other non-recurring M&A costs - These costs, including transaction costs incurred in connection with an acquired business, are incurred over a short period of time and do not represent an ongoing operating expense of the business.
- Change in loss reserves upon acquisition of a business - These changes in loss reserves are excluded from core earnings because such changes could obscure the ability to compare results in periods after the acquisition to results of periods prior to the acquisition.
- Deferred gain resulting from retroactive reinsurance and subsequent changes in the deferred gain - Retroactive reinsurance agreements economically transfer risk to the reinsurers and excluding the deferred gain on retroactive reinsurance and related amortization of the deferred gain from core earnings provides greater insight into the economics of the business.
- Change in valuation allowance on deferred taxes related to non-core components of before tax income - These changes in valuation allowances are excluded from core earnings because they relate to non-core components of before tax income, such as tax attributes like capital loss carryforwards.
- Results of discontinued operations - These results are excluded from core earnings for businesses sold or held for sale because such results could obscure the ability to compare period over period results for our ongoing businesses.
In addition to the above components of net income available to common stockholders that are excluded from core earnings, preferred stock dividends declared, which are excluded from net income, are included in the determination of core earnings. Preferred stock dividends are a cost of financing more akin to interest expense on debt and are expected to be a recurring expense as long as the preferred stock is outstanding.
Net income (loss) and net income (loss) available to common stockholders are the most directly comparable
A reconciliation of net income (loss) to core earnings for the quarterly periods ended
Core earnings margin
- The
|
Three Months Ended |
|||||
Margin |
|
|
Change |
|||
Net income margin |
8.8 |
% |
8.5 |
% |
0.3 |
|
Adjustments to reconcile net income margin to core earnings margin: |
|
|
|
|||
Net realized gains, before tax |
(0.1 |
)% |
1.5 |
% |
(1.6 |
) |
Integration and other non-recurring M&A costs, before tax |
— |
% |
0.1 |
% |
(0.1 |
) |
Income tax expense benefit on items excluded from core earnings |
— |
% |
(0.3 |
)% |
0.3 |
|
Core earnings margin |
8.7 |
% |
9.8 |
% |
(1.1 |
) |
Core earnings per diluted share
- This non-GAAP per share measure is calculated using the non-GAAP financial measure core earnings rather than the GAAP measure net income. The Company believes that core earnings per diluted share provides investors with a valuable measure of the Company's operating performance for the same reasons applicable to its underlying measure, core earnings. Net income (loss) available to common stockholders per diluted common share is the most directly comparable GAAP measure. Core earnings per diluted share should not be considered as a substitute for net income (loss) available to common stockholders per diluted common share and does not reflect the overall profitability of the Company's business. Therefore, the Company believes that it is useful for investors to evaluate net income (loss) available to common stockholders per diluted common share and core earnings per diluted share when reviewing the Company's performance. A reconciliation of net income available to common stockholders per diluted common share to core earnings per diluted share for the quarterly periods ended
|
Three Months Ended |
|||||||
|
|
|
Change |
|||||
PER SHARE DATA |
|
|
|
|||||
Diluted earnings per common share: |
|
|
|
|||||
Net income available to common stockholders per share1 |
$ |
2.56 |
|
$ |
2.09 |
|
22 |
% |
Adjustments made to reconcile net income available to common stockholders per diluted share to core earnings per diluted share: |
|
|
|
|||||
Net realized losses (gains), excluded from core earnings, before tax |
|
0.04 |
|
|
0.25 |
|
(84 |
)% |
Integration and other non-recurring M&A costs, before tax |
|
0.01 |
|
|
0.01 |
|
— |
% |
Change in deferred gain on retroactive reinsurance, before tax |
|
(0.09 |
) |
|
— |
|
NM |
|
Income tax expense (benefit) on items excluded from core earnings |
|
0.01 |
|
|
(0.06 |
) |
NM |
|
Core earnings per diluted share |
$ |
2.53 |
|
$ |
2.29 |
|
10 |
% |
[1] Net income available to common stockholders includes dilutive potential common shares |
|
|
|
Core Earnings Return on Equity
- The Company provides different measures of the return on stockholders' equity (ROE). Core earnings ROE is calculated based on non-GAAP financial measures. Core earnings ROE is calculated by dividing (a) the non-GAAP measure core earnings for the prior four fiscal quarters by (b) the non-GAAP measure average common stockholders' equity, excluding AOCI. Net income ROE is the most directly comparable
A reconciliation of consolidated net income available to common stockholders ROE to consolidated core earnings ROE is set forth below.
|
Last Twelve Months Ended |
|||
|
|
|
||
Net income available to common stockholders ROE |
20.0 |
% |
17.7 |
% |
Adjustments to reconcile net income available to common stockholders ROE to core earnings ROE: |
|
|
||
Net realized losses excluded from core earnings, before tax |
0.4 |
% |
0.9 |
% |
Restructuring and other costs, before tax |
— |
% |
0.1 |
% |
Integration and other non-recurring M&A costs, before tax |
0.1 |
% |
0.1 |
% |
Change in deferred gain on retroactive reinsurance, before tax |
0.7 |
% |
1.8 |
% |
Income tax benefit on items not included in core earnings |
(0.2 |
)% |
(0.6 |
)% |
Impact of AOCI, excluded from denominator of core earnings ROE |
(3.6 |
)% |
(5.1 |
)% |
Core earnings ROE |
17.4 |
% |
14.9 |
% |
Underlying combined ratio- This non-GAAP financial measure of underwriting results represents the combined ratio before catastrophes, prior accident year development and current accident year change in loss reserves upon acquisition of a business. Combined ratio is the most directly comparable GAAP measure. The Company believes this ratio is an important measure of the trend in profitability since it removes the impact of volatile and unpredictable catastrophe losses and prior accident year loss and loss adjustment expense reserve development. The changes to loss reserves upon acquisition of a business are excluded from underlying combined ratio because such changes could obscure the ability to compare results in periods after the acquisition to results of periods prior to the acquisition as such trends are valuable to our investors' ability to assess the Company's financial performance. A reconciliation of the combined ratio to the underlying combined ratio for individual reporting segments can be found in this news release under the heading "Business Results" for Commercial Lines" and "Personal Lines". A reconciliation of the combined ratio to underlying combined ratio for lines of business within the Company's P&C reporting segments is set forth below.
SMALL COMMERCIAL
|
Three Months Ended |
|||||
|
|
|
Change |
|||
Combined ratio |
91.6 |
|
87.7 |
|
3.9 |
|
Adjustment to reconcile combined ratio to underlying combined ratio: |
|
|
|
|||
Current accident year catastrophes |
(6.4 |
) |
(3.2 |
) |
(3.2 |
) |
Prior accident year development |
4.1 |
|
5.2 |
|
(1.1 |
) |
Underlying combined ratio |
89.3 |
|
89.7 |
|
(0.4 |
) |
MIDDLE & LARGE COMMERCIAL
|
Three Months Ended |
|||||
|
|
|
Change |
|||
Combined ratio |
97.0 |
|
94.5 |
|
2.5 |
|
Adjustment to reconcile combined ratio to underlying combined ratio: |
|
|
|
|||
Current accident year catastrophes |
(3.5 |
) |
(4.5 |
) |
1.0 |
|
Prior accident year development |
(3.3 |
) |
(1.8 |
) |
(1.5 |
) |
Underlying combined ratio |
90.2 |
|
88.1 |
|
2.1 |
|
GLOBAL SPECIALTY
|
Three Months Ended |
|||||
|
|
|
Change |
|||
Combined ratio |
87.4 |
|
88.9 |
|
(1.5 |
) |
Adjustment to reconcile combined ratio to underlying combined ratio: |
|
|
|
|||
Current accident year catastrophes |
(3.8 |
) |
(4.3 |
) |
0.5 |
|
Prior accident year development |
1.7 |
|
(0.3 |
) |
2.0 |
|
Underlying combined ratio |
85.3 |
|
84.3 |
|
1.0 |
|
PERSONAL LINES AUTO
|
Three Months Ended |
|||||
|
|
|
Change |
|||
Combined ratio |
105.7 |
|
110.8 |
|
(5.1 |
) |
Adjustment to reconcile combined ratio to underlying combined ratio: |
|
|
|
|||
Current accident year catastrophes |
(5.8 |
) |
(2.3 |
) |
(3.5 |
) |
Prior accident year development |
1.6 |
|
— |
|
1.6 |
|
Underlying combined ratio |
101.5 |
|
108.5 |
|
(7.0 |
) |
PERSONAL LINES HOMEOWNERS
|
Three Months Ended |
|||||
|
|
|
Change |
|||
Combined ratio |
94.7 |
|
101.4 |
|
(6.7 |
) |
Adjustment to reconcile combined ratio to underlying combined ratio: |
|
|
|
|||
Current accident year catastrophes |
(21.0 |
) |
(23.1 |
) |
2.1 |
|
Prior accident year development |
1.7 |
|
(0.3 |
) |
2.0 |
|
Underlying combined ratio |
75.4 |
|
78.1 |
|
(2.7 |
) |
Underwriting gain (loss)
- The
Underlying underwriting gain (loss)
- This non-GAAP measure of underwriting profitability represents underwriting gain (loss) before current accident year catastrophes, PYD and current accident year change in loss reserves upon acquisition of a business. The most directly comparable GAAP measure is net income (loss). The Company believes underlying underwriting gain (loss) is important to understand the Company’s periodic earnings because the volatile and unpredictable nature (i.e., the timing and amount) of catastrophes and prior accident year reserve development could obscure underwriting trends. The changes to loss reserves upon acquisition of a business are also excluded from underlying underwriting gain (loss) because such changes could obscure the ability to compare results in periods after the acquisition to results of periods prior to the acquisition as such trends are valuable to our investors' ability to assess the Company's financial performance. A reconciliation of net income (loss) to underlying underwriting gain (loss) for individual reporting segments for the quarterly periods ended
COMMERCIAL LINES
|
Three Months Ended |
|||||
|
|
|
||||
Net income |
$ |
528 |
|
$ |
519 |
|
Adjustments to reconcile net income to underwriting gain: |
|
|
||||
Net investment income |
|
(442 |
) |
|
(395 |
) |
Net realized losses |
|
32 |
|
|
38 |
|
Other income (expense) |
|
1 |
|
|
(2 |
) |
Income tax expense |
|
134 |
|
|
130 |
|
Underwriting gain |
|
253 |
|
|
290 |
|
Adjustments to reconcile underwriting gain to underlying underwriting gain: |
|
|
||||
Current accident year catastrophes |
|
155 |
|
|
115 |
|
Prior accident year development |
|
(36 |
) |
|
(46 |
) |
Underlying underwriting gain |
$ |
372 |
|
$ |
359 |
|
PERSONAL LINES
|
Three Months Ended |
|||||
|
|
|
||||
Net income (loss) |
$ |
31 |
|
$ |
(12 |
) |
Adjustments to reconcile net income (loss) to underwriting loss: |
|
|
||||
Net investment income |
|
(58 |
) |
|
(47 |
) |
Net realized losses |
|
2 |
|
|
5 |
|
Net servicing and other income (expense) |
|
(5 |
) |
|
(3 |
) |
Income tax expense (benefit) |
|
8 |
|
|
(5 |
) |
Underwriting loss |
|
(22 |
) |
|
(62 |
) |
Adjustments to reconcile underwriting loss to underlying underwriting gain: |
|
|
||||
Current accident year catastrophes |
|
92 |
|
|
69 |
|
Prior accident year development |
|
(14 |
) |
|
1 |
|
Underlying underwriting gain |
$ |
56 |
|
$ |
8 |
|
Underlying loss and loss adjustment expense ratio -
This non-GAAP financial measure of the loss and loss adjustment expense ratio for Commercial Lines and Personal Lines represents the loss and loss adjustment expense ratio before catastrophes and prior accident year development. The loss and loss adjustment expense ratio is the most directly comparable GAAP measure. The underlying loss and loss adjustment expense ratio is an important measure of the trend in profitability since it removes the impact of volatile and unpredictable catastrophe losses and prior accident year reserve development. A reconciliation of the loss and loss adjustment expense ratio to the underlying loss and loss adjustment expense ratio for the quarterly periods ended
COMMERCIAL LINES
|
Three Months Ended |
||||||||
|
|
|
Change |
||||||
Loss and loss adjustment expense ratio |
|
|
|
||||||
Total losses and loss adjustment expenses |
61.0 |
|
58.9 |
|
2.1 |
|
|||
Current accident year catastrophes |
|
(4.8 |
) |
|
(3.9 |
) |
|
(0.9 |
) |
Prior accident year development |
|
1.1 |
|
|
1.6 |
|
|
(0.5 |
) |
Underlying loss and loss adjustment expense ratio |
|
57.3 |
|
|
56.6 |
|
|
0.7 |
|
PERSONAL LINES
|
Three Months Ended |
||||||||
|
|
|
Change |
||||||
Loss and loss adjustment expense ratio |
|
|
|
||||||
Total losses and loss adjustment expenses |
76.8 |
|
83.7 |
|
(6.9 |
) |
|||
Current accident year catastrophes |
|
(10.4 |
) |
|
(8.8 |
) |
|
(1.6 |
) |
Prior accident year development |
|
1.6 |
|
|
(0.1 |
) |
|
1.7 |
|
Underlying loss and loss adjustment expense ratio |
|
68.0 |
|
|
74.7 |
|
|
(6.7 |
) |
Net investment income, excluding limited partnerships and other alternative investments
-This non-GAAP measure is the amount of net investment income, on a Consolidated, P&C or Group Benefits level earned from invested assets, excluding the net investment income related to limited partnerships and other alternative investments. The Company believes that net investment income, excluding limited partnerships and other alternative instruments, provides investors with an important measure of the trend in investment earnings because it excludes the impact of the volatility in returns related to limited partnerships and other alternative instruments. Net investment income is the most directly comparable GAAP measure. A reconciliation of net investment income to net investment income excluding limited partnerships and other alternative investments for the quarterly periods ended
|
|
Three Months Ended |
|||||
|
|
|
||||
|
Consolidated |
|||||
Total net investment income |
$ |
659 |
|
$ |
597 |
|
Loss (income) from limited partnerships and other alternative assets |
|
(37 |
) |
|
(72 |
) |
Net investment income excluding limited partnerships and other alternative investments |
$ |
622 |
|
$ |
525 |
|
SAFE HARBOR STATEMENT
Certain of the statements contained herein are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “projects,” and similar references to future periods.
Forward-looking statements are based on management's current expectations and assumptions regarding future economic, competitive, legislative and other developments and their potential effect upon
- Risks Relating to Economic, Political and Global Market Conditions: challenges related to the Company’s current operating environment, including global political, economic and market conditions, and the effect of financial market disruptions, economic downturns, changes in trade regulation including tariffs and other barriers or other potentially adverse macroeconomic developments on the demand for our products and returns in our investment portfolios; market risks associated with our business, including changes in credit spreads, equity prices, interest rates, inflation rate, foreign currency exchange rates and market volatility; the impact on our investment portfolio if our investment portfolio is concentrated in any particular segment of the economy; the impacts of changing climate and weather patterns on our businesses, operations and investment portfolio including on claims, demand and pricing of our products, the availability and cost of reinsurance, our modeling data used to evaluate and manage risks of catastrophes and severe weather events, the value of our investment portfolios and credit risk with reinsurers and other counterparties;
- Insurance Industry and Product-Related Risks: the possibility of unfavorable loss development, including with respect to long-tailed exposures; the significant uncertainties that limit our ability to estimate the ultimate reserves necessary for asbestos and environmental claims; the possibility of a pandemic, civil unrest, earthquake, or other natural or man-made disaster that may adversely affect our businesses; weather and other natural physical events, including the intensity and frequency of thunderstorms, tornadoes, hail, wildfires, flooding, winter storms, hurricanes and tropical storms, as well as climate change and its potential impact on weather patterns; the possible occurrence of terrorist attacks and the Company’s inability to contain its exposure as a result of, among other factors, the inability to exclude coverage for terrorist attacks from workers' compensation policies and limitations on reinsurance coverage from the federal government under applicable laws; the Company’s ability to effectively price its products and policies, including its ability to obtain regulatory consents to pricing actions or to non-renewal or withdrawal of certain product lines; actions by competitors that may be larger or have greater financial resources than we do; technological changes, including usage-based methods of determining premiums, advancements in certain emerging technologies, including machine learning, predictive analytics, “big data” analysis or other artificial intelligence functions, advancements in automotive safety features, the development of autonomous vehicles, and platforms that facilitate ride sharing; the Company's ability to market, distribute and provide insurance products and investment advisory services through current and future distribution channels and advisory firms; the uncertain effects of emerging claim and coverage issues; political instability, politically motivated violence or civil unrest, which may increase the frequency and severity of insured losses; the ongoing effects of the COVID-19 pandemic, including exposure to COVID-19 business interruption property claims and the possibility of a resurgence of COVID-19 related losses in Group Benefits;
Financial Strength, Credit and Counterparty Risks: risks to our business, financial position, prospects and results associated with negative rating actions or downgrades in the Company’s financial strength and credit ratings or negative rating actions or downgrades relating to our investments; capital requirements which are subject to many factors, including many that are outside the Company’s control, such as
Risks Relating to Estimates, Assumptions and Valuations: risks associated with the use of analytical models in making decisions in key areas such as underwriting, pricing, capital management, reserving, investments, reinsurance and catastrophe risk management; the potential for differing interpretations of the methodologies, estimations and assumptions that underlie the Company’s fair value estimates for its investments and the evaluation of intent-to-sell impairments and allowance for credit losses on available-for-sale securities and mortgage loans; the potential for impairments of our goodwill;
Strategic and Operational Risks: the Company’s ability to maintain the availability of its systems and safeguard the security of its data in the event of a disaster, cyber or other information security incident or other unanticipated event; the potential for difficulties arising from outsourcing and similar third-party relationships; the risks, challenges and uncertainties associated with capital management plans, expense reduction initiatives and other actions; risks associated with acquisitions and divestitures, including the challenges of integrating acquired companies or businesses, which may result in our inability to achieve the anticipated benefits and synergies and may result in unintended consequences; difficulty in attracting and retaining talented and qualified personnel, including key employees, such as executives, managers and employees with strong technological, analytical and other specialized skills; the Company’s ability to protect its intellectual property and defend against claims of infringement;
Regulatory and Legal Risks: the cost and other potential effects of increased federal, state and international regulatory and legislative developments, including those that could adversely impact the demand for the Company’s products, operating costs and required capital levels; unfavorable judicial or legislative developments; the impact of changes in federal, state or foreign tax laws; regulatory requirements that could delay, deter or prevent a takeover attempt that stockholders might consider in their best interests; and the impact of potential changes in accounting principles and related financial reporting requirements.
Any forward-looking statement made by the Company in this document speaks only as of the date of this release. Factors or events that could cause the Company’s actual results to differ may emerge from time to time, and it is not possible for the Company to predict all of them. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.
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Media Contacts:
860-547-7413
michelle.loxton@thehartford.com
860-547-8664
matthew.sturdevant@thehartford.com
Investor Contact:
860-547-6233
susan.spivak@thehartford.com
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