Hartford to Break-even in 2Q - Analyst Blog
July 15 2011 - 8:00AM
Zacks
Yesterday, Hartford Financial Services Group
Inc. (HIG) charted out its preliminary results for the
second quarter of 2011, whereby the reported net income is expected
to be $24 million or 3 cents per share, substantially lower than
$76 million or 14 cents recorded in the year-ago quarter.
Besides, core operating earnings are expected to be $12 million
or break-even on per share basis. Results primarily reflected the
impact of post-tax catastrophe (CAT) losses of $290 million and
incremental litigation reserves of $189 million to counter annual
legacy asbestos liabilities.
Additionally, a charge of $73 million will be taken to write off
capitalized costs associated with a discontinued software project,
while $74 million will be incurred on Hartford’s previously
announced sale of Federal Trust Corp. These charges will be
partially offset by a $52 million tax gain on the favourable
outcome of a tax matter related to dividend deductions in 1998,
2000 and 2001.
Besides, Hartford’s investment portfolio has been performing
well and is expected to record net unrealized gains of $800 million
in the second quarter, against losses of $161 million booked in the
prior-quarter. While management kept a bright outlook on the
top-line front, it did not provide any financial details of its
sales.
It appears that the general fear of natural disasters and
consequent loss of life and property have been compelling
people to buy decent amounts of insurance coverage for
themselves. While this has led to a surge in premium income, claim
rate has also increased tremendously. Hence, realizing the
opportunities and problems, the insurers are gradually increasing
the prices of their products, after years of sharp pricing declines
in the industry.
Yesterday, Allstate Corp. (ALL) also reported
that it expects to book about $2.3 billion in CAT losses in the
second quarter of 2011, thereby generating a net loss. Even
PartnerRe Ltd. (PRE) expects to incur $50–$70
million from the US disasters in the second quarter.
Overall, we believe that the fate of insurers will now depend on
how well they manage to counterbalance the money outflow due to the
increasing number of claims with money inflows from growing demand
for insurance policies and premium hike.
ALLSTATE CORP (ALL): Free Stock Analysis Report
HARTFORD FIN SV (HIG): Free Stock Analysis Report
PARTNERRE LTD (PRE): Free Stock Analysis Report
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