The Hartford Financial Services Group reported earnings Monday that beat analysts’ expectations as the company pulls away from its recent history as a multi-line insurer offering annuities and retirement plans to one focused on property-casualty.
The Hartford’s financial performance reflects a leaner company than this time last year. The company has shed several business units over the past year while it continues to raise prices in commercial property-casualty and other businesses to improve profitability.
Net income during the quarter was $293 million, or 60 cents per share, compared with $13 million, or 1 cent per share, during the same period last year.
Core earnings for the quarter was up to $505 million, or $1.03 per share, from $433 million, or 90 cents per share, during the same period a year ago. Analysts polled by Bloomberg were expecting, on average, 83 cents per share.
The Hartford is among property-casualty insurers that have increased rates after a long period of declining rates known as a “soft market” in the insurance industry. Prices increased 8 percent at The Hartford’s Property & Casualty Standard Commercial segment, which the company said is consistent with the past four quarters.
The Hartford announced a new strategy in 2012 to focus on property-casualty, group benefits and mutual funds, and all three segments are considered the company’s “go forward” businesses. At the same time the company ended new sales of annuities to individuals and the company sold its individual life-insurance business as well as retirement plans and its Woodbury Financial brokerage. The goal is to focus on more profitable businesses and reduce risk to equity markets.
“Margins are improving in our go-forward businesses, contributing to a 17 percent year-over-year increase in core earnings, and the company continues to reduce its overall risk profile,” The Hartford’s Chairman and CEO Liam E. McGee said in a prepared statement.
The company’s combined revenue for Property & Casualty from written premiums was up 2 percent to $2.56 billion from $2.51 billion during the same period last year. Property & Casualty net income was down to $264 million for the quarter from $282 million last year. Core earnings were down to $263 million from $275 million during the same period last year.
Declines in property-casualty net income were because of higher catastrophe losses due to thunderstorms and tornadoes in the South, Midwest and Mid-Atlantic states, as well as less favorable prior-year development. Prior-year development is unspent reserves from the corresponding quarter last year that were set aside to pay claims.
In Mutual Funds, The Hartford reported sales are up to $3.8 billion during the quarter from $2.9 billion during the same period last year. Core earnings in Mutual Funds were down to $18 million from $19 million.
“We are ahead of plan in executing the strategy we outlined in March 2012 and, with continued strong surrenders in Talcott, the variable annuity block is running off faster than anticipated,” he said.
Talcott Resolution is the company’s variable annuity business in runoff, meaning the business will end once the last of the existing policies are finished. Talcott’s core earnings were $204 million, up from $192 million during the same period a year earlier.
The Hartford reported earnings after the New York Stock Exchange closed Monday. Shares of the company’s stock were up 41 cents to $34.31 in after-hours trading.