- Net income of $372 million ($1.02 per diluted share) included
reinsurance and reserve charges related to the acquisition of The
Navigators Group, Inc. ("Navigators"), which closed on May 23,
2019, of $149 million, after tax ($0.41 per diluted share)
- Core earnings* of $485 million and core earnings per diluted
share* of $1.33 both rose 18% over second quarter 2018 due to
better Personal Lines, Group Benefits and Corporate results,
partially offset by lower Commercial Lines core earnings
- Net income ROE for the trailing 12-month period ended June 30,
2019, was 11.8% and core earnings ROE* for the same period was
11.7%
- Book value per diluted share was $41.00, up 17% from Dec. 31,
2018; book value per diluted share excluding accumulated other
comprehensive income (AOCI)* rose 5% to $41.55
- During the quarter, The Hartford began share repurchases under
its $1.0 billion authorization, purchasing 0.5 million common
shares for $27 million and paid $107 million in common
dividends
- The company also provided a second half 2019 outlook for
Commercial Lines combined ratio, which includes Navigators, in a
range of 95.0% to 97.0%
The Hartford (NYSE: HIG) reported second quarter 2019 net income
of $372 million, or $1.02 per diluted share, down from $582
million, or $1.60 per diluted share, in second quarter 2018. The
decrease was principally due to income from discontinued
operations, net of tax, of $148 million, in second quarter 2018
related to the company's former run-off annuity business that was
sold in May 2018 and second quarter 2019 reinsurance and loss
reserve charges related to the May 2019 acquisition of Navigators
that totaled $149 million, after tax, which are discussed in the
Commercial Lines segment results section of this news release.
Excluding these two items, second quarter net income increased
principally due to higher net investment income, better margins in
Group Benefits, solid underwriting results in Property and Casualty
(P&C) businesses and reduced Corporate net loss.
* 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
Core earnings of $485 million in second quarter 2019 increased
18% from $412 million in second quarter 2018, reflecting better
results in Personal Lines, Group Benefits and Corporate offset in
part by lower Commercial Lines core earnings. Core earnings per
diluted share of $1.33 was up 18% from $1.13 per diluted share, in
second quarter 2018.
“The Hartford produced strong margins and profitability in the
second quarter, including lower catastrophe results, better group
disability trends and good investment returns," said The Hartford’s
Chairman and CEO Christopher Swift. “We closed the acquisition of
Navigators at the end of May, and are excited by the strategic
opportunities in Commercial Lines as a result of our combined
capabilities. In addition, we commenced share repurchases under the
$1.0 billion authorization and returned $134 million to
shareholders, through dividends and share repurchases during the
quarter.”
"This was another strong quarter for our business units, with
solid results on both the top and bottom line," said The Hartford’s
President Doug Elliot. “Group Benefits had an outstanding quarter,
and Property and Casualty margins were very good, although impacted
by the actions we took on acquired reserves from Navigators.
Integration activities have begun and are successfully advancing,
and the agent and broker marketing program is well underway, as we
focus on profitable growth in our combined Commercial Lines
operation."
June 30, 2019 book value per diluted share of $41.00 rose 17%
from $35.06 at Dec. 31, 2018 due to a 17% increase in common
stockholders' equity resulting primarily from the impact of lower
market interest rates and tighter credit spreads on AOCI and from
first half 2019 net income in excess of common stockholder
dividends and share repurchases. Book value per diluted share
(excluding AOCI) of $41.55 as of June 30, 2019 increased 5% from
$39.40 at Dec. 31, 2018 primarily due to first half 2019 net income
in excess of common stockholder dividends declared and share
repurchases. During first half 2019, the company returned $243
million to shareholders, consisting of $216 million in common
stockholder dividends paid and $27 million of common share
repurchases.
Second quarter 2019 net income return on equity (ROE)1, which is
based on net income and average shareholder equity over the
trailing 12-month period, was 11.8% compared with net loss ROE of
15.4% in second quarter 2018. The second quarter 2018 net loss ROE
was principally due to the impact of the $2.7 billion net loss on
discontinued operations from the sale of Talcott Resolution, the
company's former run-off annuity business, and the fourth quarter
2017 charge of $877 million related to U.S. corporate income tax
reform.
Core earnings ROE in second quarter 2019 rose to 11.7%, 3.3
points higher than 8.4% in second quarter 2018, driven by a 31%
increase in trailing 12-month core earnings to $1.7 billion in
second quarter 2019 from $1.3 billion in second quarter 2018.
[1] Net income ROE represents net income (loss) available to
common stockholders ROE
FINANCIAL RESULTS SUMMARY
($ in millions except per share data)
Three Months Ended
Jun 30 2019
Jun 30 2018
Change¹
Net income by segment:
Commercial Lines
$191
$372
(49)%
Personal Lines
62
6
NM
P&C Other Operations
11
5
120%
Property & Casualty
264
383
(31)%
Group Benefits
113
96
18%
Hartford Funds
38
37
3%
Sub-total
415
516
(20)%
Corporate
(43)
66
NM
Net income
$372
$582
(36)%
Adjustment to reconcile net income to
income from continuing operations, net of tax:
Income from discontinued operations, net
of tax
—
(148)
100%
Income from continuing operations, net
of tax
$372
$434
(14)%
Adjustments to reconcile income from
continuing operations, net of tax, to core earnings:
Net realized capital losses (gains),
excluded from core earnings, before tax
(79)
(50)
(58)%
Loss on extinguishment of debt, before
tax
—
6
(100)%
Loss on reinsurance transaction, before
tax
91
—
NM
Integration and transaction costs
associated with acquired business, before tax
31
11
182%
Change in loss reserves upon acquisition
of a business, before tax
97
—
NM
Income tax expense (benefit), including
amounts related to before tax items excluded from core earnings
(27)
11
NM
Core earnings
$485
$412
18%
Net income available to common
stockholders
$372
$582
(36)%
Weighted average diluted common shares
outstanding
365.1
364.2
—%
Income from continuing operations, net of
tax, available to common stockholders per diluted share2
$1.02
$1.19
(14)%
Net income available to common
stockholders per diluted share2
$1.02
$1.60
(36)%
Core earnings per diluted share2
$1.33
$1.13
18%
Select financial measures:
Common shares outstanding and dilutive
potential common shares
364.8
364.3
—%
Book value per diluted share
$41.00
$34.44
19%
Book value per diluted share (excluding
AOCI)*
$41.55
$38.15
9%
Net income (loss) available to common
stockholders ROE3, last 12-months
11.8%
(15.4)%
27.2
Core earnings ROE3, last 12-months
11.7%
8.4%
3.3
[1] The Hartford defines increases or decreases greater than or
equal to 200%, or changes from a net gain to a net loss position,
or vice versa, as "NM" or not meaningful [2] Includes dilutive
potential common shares; for income (loss) from continuing
operations, net of tax, available to common stockholders per
diluted share, the numerator is income from continuing operations,
after tax, less preferred dividends [3] Return on equity (ROE) is
calculated based on last 12-months net income available to common
stockholders and core earnings, respectively; for net income ROE,
the denominator is stockholders’ equity including AOCI; for core
earnings ROE, the denominator is stockholders’ equity excluding
AOCI
SECOND QUARTER 2019 SEGMENT FINANCIAL RESULTS SUMMARY
Three Months Ended
($ in millions)
Jun 30 2019
Jun 30 2018
Change
Core earnings (losses)
P&C segments:
Commercial Lines
$304
$341
(11)%
Personal Lines
55
2
NM
P&C Other Operations
8
3
167%
Property & Casualty
367
346
6%
Group Benefits
115
104
11%
Hartford Funds
38
38
—%
Sub-total
520
488
7%
Corporate
(35)
(76)
54%
Total
$485
$412
18%
Select business metrics:
Commercial Lines
Combined ratio [1]
100.3
90.1
10.2
Adjustments to reconcile combined ratio
to underlying combined ratio:
Impact of catastrophes and PYD on combined
ratio
(5.6)
—
(5.6)
Current accident year change in loss
reserves upon acquisition of a business
(1.5)
—
(1.5)
Underlying combined ratio
93.2
90.0
3.2
Personal Lines
Combined ratio
97.5
104.9
(7.4)
Adjustments to reconcile combined ratio
to underlying combined ratio:
Impact of catastrophes and PYD on combined
ratio
(6.5)
(14.5)
8.0
Underlying combined ratio
91.0
90.4
0.6
Group Benefits
Loss ratio
74.6%
75.5%
(0.9)
Expense ratio [2]
23.9%
23.9%
—
Net income margin
7.3%
6.3%
1.0
Core earnings margin*
7.5%
6.9%
0.6
Hartford Funds
Mutual fund and exchange-traded products
(ETP) net flows
$(105)
$473
NM
Total Hartford Funds assets under
management (AUM)
$121,301
$117,041
4%
[1] Integration and transaction costs related to the acquisition
of Navigators are not included in the combined ratio. [2]
Integration and transaction costs related to the acquisition of
Aetna's U.S. group life and disability business are not included in
the expense ratio.
Commercial Lines
- Effective upon the closing of the acquisition of Navigators on
May 23, 2019, the company realigned the Commercial Lines segment
lines of business among Small Commercial, Middle & Large
Commercial, and Global Specialty (formerly Small Commercial, Middle
Market and Specialty Commercial) to reflect the new management
reporting structure. The realignment included moving a portion of
excess and surplus lines from Small Commercial to Global Specialty,
moving livestock business from Middle Market to Global Specialty
and moving national accounts and captive programs from Specialty
Commercial to Middle & Large Commercial. In addition, financial
products and bond business, previously included in Specialty
Commercial, are now included in Global Specialty.
- Commercial Lines written premiums of $2.1 billion rose 20% from
second quarter 2018 with growth from all three businesses; earned
premiums rose 14% to $2.0 billion from $1.7 billion in second
quarter 2018
- Small Commercial written premiums increased 6% from second
quarter 2018 driven by 29% growth in new business, including the
Foremost renewal rights agreement, and better retention, partially
offset by the impact of lower workers' compensation renewal written
pricing
- Middle & Large Commercial written premiums increased 15%
from second quarter 2018 due to 31% growth in new business and
higher renewal premium in Middle Market driven by renewal written
price increases in most lines and higher retention, partially
offset by a modest decline in National Accounts
- Global Specialty written premiums increased by $192 million
over second quarter 2018 to a total of $353 million principally due
to increased premium from the acquisition of Navigators, as well as
growth in financial products and property
- Commercial Lines net income of $191 million decreased $181
million from $372 million in second quarter 2018 principally due to
reinsurance and reserve charges of $149 million, after tax, related
to the Navigators acquisition. The second quarter 2019 charges were
comprised of:
- As previously-announced, a $72 million, after tax ($91 million,
before tax) charge for the purchase of an aggregate excess of loss
reinsurance treaty covering up to $300 million in excess of $100
million of unfavorable development on Navigators loss reserves as
of Dec. 31, 2018 for 2018 and prior accident year loss reserves
subject to the treaty
- A charge for a change in loss reserves upon acquisition of
Navigators that totaled $77 million, after tax ($97 million, before
tax). This charge consisted of $23 million, after tax ($29 million,
before tax), for the 2019 accident year and $54 million, after tax
($68 million, before tax), for prior accident year development
(PYD)
- As of June 30, 2019, after considering unfavorable development
on Navigators 2018 and prior accident years reserves that was
incurred since Dec. 31, 2018 and subject to the treaty, the company
has approximately $209 million of limit available for future
potential unfavorable loss reserve development under the
treaty
- Core earnings of $304 million, which do not include the
Navigators acquisition reinsurance and reserve charges, declined
11% from $341 million in second quarter 2018 due to a variety of
items including higher current accident year losses and loss
adjustment expenses before catastrophes, higher current accident
year catastrophe losses, lower net favorable PYD (excluding
Navigators) and higher underwriting expenses, partially offset by
increased net investment income and the effect of higher earned
premiums. Current accident year catastrophe losses of $90 million,
before tax, were $16 million higher than $74 million, before tax,
in second quarter 2018 and net favorable PYD (excluding Navigators)
of $46 million, before tax, decreased $27 million compared with $73
million, before tax, in second quarter 2018, principally due to
lower net favorable development for prior accident year catastrophe
and workers' compensation reserves
- Net investment income, before tax, was $281 million, up 16%
from second quarter 2018, due to increased asset levels,
principally from the Navigators acquisition, and higher returns on
limited partnerships and other alternative investments (LPs)
- The underlying underwriting gain* of $136 million decreased 22%
from $174 million in second quarter 2018 due to a higher number of
large inland marine losses in Middle & Large Commercial, higher
Small Commercial property losses in second quarter 2019 compared
with lower than average fire-related property losses in second
quarter 2018, and higher underwriting expenses, including higher
commissions and planned investments in technology and other
initiatives, partially offset by the impact of higher earned
premiums
- The combined ratio of 100.3, which included a 4.9 point impact
from Navigators prior and current accident year loss reserve
charges, rose 10.2 points from 90.1 in second quarter 2018
- Excluding Navigators reserve charges, the combined ratio was
5.3 points higher due to a 3.2 point increase in the underlying
combined ratio, a 1.9 point increase from less net favorable PYD,
and a slightly higher current accident year catastrophe loss
ratio
- The underlying combined ratio of 93.2, which does not include
the 1.5 point Navigators current accident year loss reserve charge,
was 3.2 points higher than second quarter 2018, reflecting a 1.8
point increase in the current accident year loss and loss
adjustment expense ratio before catastrophes and a 1.3 point
increase in the expense ratio
- The increase in the current accident year loss and loss
adjustment expense ratio before catastrophes was principally due to
higher property losses in Small Commercial and in Middle &
Large Commercial
- The increase in the expense ratio reflected higher commissions,
state taxes, and state assessments as well as planned increases in
operating and other expenses in Middle & Large Commercial and
Small Commercial businesses
- Small Commercial underlying combined ratio increased by 2.6
points to 87.8 driven by a higher expense ratio principally due to
higher commissions as well as increased expenses related to the
2018 Foremost renewal rights agreement, an increase in the 2019
property loss ratio compared to favorable 2018 experience, and a
higher workers' compensation loss ratio due to lower workers'
compensation earned pricing levels in 2019
- Middle & Large Commercial underlying combined ratio rose by
3.8 points to 100.9 principally due to the impact of a higher
number of large inland marine losses on the loss and loss
adjustment expense ratio and of higher commissions and planned
information technology investments and operations costs on the
expense ratio
- Global Specialty underlying combined ratio of 90.7 was 2.6
points higher than second quarter 2018 primarily due to the higher
underlying combined ratio on the Navigators business, which
comprised the majority of the Global Specialty business in second
quarter 2019, compared with the lower combined ratio on financial
products and bond business, which comprised the majority of the
Global Specialty business in second quarter 2018
- The company also provided its second half 2019 outlook for the
Commercial Lines combined ratios[1], including Navigators as well
as the impact of intangibles amortization of:
- Combined ratio of 95.0% to 97.0% for second half 2019,
including current accident year catastrophe loss ratio of 2.6%[2]
and unfavorable PYD from accretion of discount on workers'
compensation reserves of 0.4%
- Underlying combined ratio outlook of 92.0% to 94.0% for second
half 2019, with a range of 94.5% to 96.5% for Global Specialty
[1] 2H19 Commercial Lines outlook, incorporating purchase
accounting impacts, including intangibles amortization, are
management estimates based on business, competitive, capital
market, catastrophe and other assumptions. Actual 2019 results are
subject to unusual or unpredictable items such as weather or
catastrophe losses, change in loss frequency and severity,
regulatory changes or assessments, PYD, capital markets or
investment results and other factors that are not within
management's control. The company has frequently experienced
unusual or unpredictable changes in revenues, expenses or other
items that were not anticipated in prior outlooks. [2] 2H19
Commercial Lines actual catastrophes results are likely to be
different and will fluctuate quarterly due to seasonal
variations.
Personal Lines
- Personal Lines written premiums of $824 million declined 4%
from second quarter 2018 as strong new business premium growth,
renewal written price increases, and improved policy retention
rates did not offset the loss of premium from non-renewals. In
second quarter 2019, new business premium of $79 million rose $26
million, or 49%, over second quarter 2018, reflecting the benefit
of increased marketing initiatives. Policy count retention ratios
improved to 85% for both auto and homeowners in second quarter 2019
from 82% in auto and 84% in homeowners in second quarter 2018.
Premium retention improved for auto to 87% from 86% in second
quarter 2019 while homeowners' premium retention was down one point
to 90%
- Personal Lines net income of $62 million was up $56 million
from $6 million in second quarter 2018 due to lower current
accident year catastrophe losses and, to a lesser extent, higher
net investment income
- Catastrophe losses decreased 58% from $114 million in second
quarter 2018 to $48 million in second quarter 2019
- Net investment income rose to $46 million, before tax, from $37
million, before tax, in part due to higher LP returns
- Core earnings of $55 million were up $53 million from $2
million in second quarter 2018 principally due to better
underwriting results primarily due to lower catastrophe losses and
higher net investment income
- The combined ratio of 97.5 decreased from 104.9 in second
quarter 2018 primarily due to a 7.3 point decrease in the current
accident year catastrophe loss ratio and a 0.7 point reduction in
unfavorable PYD, partially offset by a 1.1 point increase in the
expense ratio; the increase in expense ratio was largely due to
planned investments in information technology and marketing
expenses
- The auto combined ratio of 97.2 was 2.5 points better than
second quarter 2018 as lower current accident year catastrophe
losses, lower current accident year losses and loss adjustment
expenses before catastrophes, and higher net favorable PYD were
offset in part by a higher expense ratio
- The homeowners combined ratio was down 18.5 points to 99.3 from
117.8 in second quarter 2018 primarily due to an 18.8 point decline
in the current accident year catastrophe loss ratio and a 2.4 point
decrease in net unfavorable PYD
- The underlying combined ratio of 91.0 was 0.6 point higher than
second quarter 2018, as the 1.1 point increase in the expense ratio
was partially offset by a 0.6 point improvement in the current
accident year loss and loss adjustment expense ratio before
catastrophes, mainly due to improvement in auto
- The auto underlying combined ratio of 96.7 was 0.2 point higher
than in second quarter 2018 due to the higher expense ratio
partially offset by a lower current accident year loss and loss
adjustment expense ratio before catastrophes due to favorable
frequency trends
- The homeowners underlying combined ratio rose 2.8 points to
79.2 from second quarter 2018 primarily due to increased average
severity and the increase in the expense ratio
Group Benefits
- Fully insured ongoing premiums, excluding buyouts, of $1.4
billion were 2% higher than second quarter 2018 due to in-force
growth in group disability and voluntary business. Group disability
premiums rose 6% while group life premiums decreased 3% from second
quarter 2018
- Fully insured ongoing sales, excluding buyouts, of $99 million
were up 16% from $85 million in second quarter 2018
- Group disability sales of $48 million increased 2% from second
quarter 2018 while group life sales of $43 million rose 26%
- Group Benefits net income of $113 million rose 18% from $96
million in second quarter 2018 and core earnings were $115 million
increased 11%, from $104 million over the same period. Both
increases were driven by better disability loss results and higher
net investment income, while higher net realized capital gains also
contributed to the increase in net income
- The net income margin rose to 7.3% from 6.3% in second quarter
2018
- The core earnings margin was 7.5% compared with 6.9% in second
quarter 2018
- The total loss ratio of 74.6% improved 0.9 point from second
quarter 2018 due to a better group disability loss ratio, which was
partially offset by a slight increase in the group life loss ratio
- The 1.4 point decrease in the group disability loss ratio was
due primarily to continued favorable incidence trends
- The 0.4 point slight increase in the group life loss ratio was
within expected mortality trends in 2Q19
- The expense ratio of 23.9% was flat with second quarter 2018
due to planned investments in technology and higher commissions,
offset by expense synergies and lower amortization of intangible
assets from the 2017 acquisition
Hartford Funds
- Hartford Funds net income and core earnings of $38 million were
flat with second quarter 2018
- Hartford Funds AUM at June 30, 2019, rose to $121 billion, up
4% from June 30, 2018, and 16% from Dec. 31, 2018, reflecting
strong equity market performance in the first half of 2019 offset
in part by decreases in Talcott Resolution life and annuity
separate account AUM due to the runoff of that business
- Mutual fund and ETP net outflows totaled $105 million in second
quarter 2019, compared with net inflows of $473 million in second
quarter 2018 primarily due to lower flow into international and
emerging market equity funds
- Hartford Funds average daily AUM was $118 billion in second
quarter 2019, up 1% from second quarter 2018
Corporate
- Net loss of $43 million in second quarter 2019 declined from
net income of $66 million in second quarter 2018 largely due to
$148 million of income from discontinued operations, net of tax, in
second quarter of 2018, related to the sale of Talcott Resolution,
the company's former run-off annuity business
- Corporate core losses declined $41 million, after tax, to $35
million from $76 million in second quarter 2018 due to lower
interest expense, higher net investment income, and the elimination
of stranded costs from the sale of Talcott Resolution
- Interest expense of $63 million, before tax, was down $16
million, or 20%, from $79 million, before tax, in second quarter
2018, due to debt management actions
- Net investment income of $17 million, before tax, increased 54%
from $11 million, before tax, in second quarter 2018 mainly due to
the increase in short term rates
SELECT INVESTMENT INCOME AND PORTFOLIO DATA
($ in millions)
Three Months Ended
Jun 30 2019
Jun 30 2018
Change
Net investment income
$488
$428
14%
Annualized investment yield, before
tax
4.2%
3.9%
0.3
Annualized investment yield, before tax,
excluding LPs*
3.8%
3.7%
0.1
Annualized LP yield, before tax
13.9%
9.5%
4.4
Annualized investment yield, after tax
3.4%
3.3%
0.1
P&C net investment income
$348
$301
16%
P&C annualized investment yield,
before tax
4.2%
4.0%
0.2
P&C annualized investment yield,
before tax, excluding LPs*
3.8%
3.8%
—
P&C annualized investment yield, after
tax
3.5%
3.4%
0.1
Group Benefits net investment income
$121
$115
5%
Group Benefits annualized investment
yield, before tax
4.2%
4.1%
0.1
Group Benefits annualized investment
yield, before tax, excluding LPs*
3.9%
3.9%
—
Group Benefits annualized investment
yield, after tax
3.4%
3.4%
—
Second quarter 2019 consolidated net investment income rose 14%
to $488 million, before tax, from $428 million, before tax, in
second quarter 2018 due to higher income from fixed maturities as a
result of the Navigators acquisition as well as higher income from
LPs. Total invested assets rose 9% from Dec. 31, 2018 due
principally to the Navigators acquisition. Second quarter 2019
investment income from LPs was $60 million, before tax, up 54% from
$39 million, before tax, in second quarter 2018. Reflecting a
generally benign credit environment, there were no impairment
losses in either period.
The annualized investment yield, before tax, was 4.2% for second
quarter 2019, up 0.3 point from 3.9% in second quarter 2018
principally due to higher returns on LPs. The annualized investment
yield, after tax, also increased from 3.3% in second quarter 2018
to 3.4% in second quarter 2019 for the same reason. LPs produced a
strong annualized before tax return of 13.9% in second quarter 2019
compared with 9.5% in second quarter 2018. Excluding LPs, the
annualized investment yield, before tax, was 3.8% for second
quarter 2019, up slightly from 3.7% in second quarter 2018 due to
reinvesting maturities at higher rates during the second half of
2018 and increased short term rates.
The P&C annualized investment yield, before tax, was 4.2% in
second quarter 2019, up 0.2 point from 4.0% in second quarter 2018
due principally to higher returns on LPs, which were 13.9% in
second quarter 2019 compared with 9.3% in the prior year quarter.
The P&C annualized yield, after tax, was 3.5%, up 0.1 point
from 3.4% in second quarter 2018 due to the impact of LPs. The
P&C annualized investment yield, after tax, excluding LPs, was
3.2% in second quarter 2019, flat with the prior year quarter.
The Group Benefits annualized investment yield, before tax, was
4.2% in second quarter 2019, up slightly from 4.1% in second
quarter 2018 principally due to higher returns on LPs, which were
14.0% in second quarter 2019, up from 10.6% in second quarter 2018.
The Group Benefits annualized investment yield, after tax, was
3.4%, flat with second quarter 2019. The annualized investment
yield, after tax, excluding LPs was 3.2%, slightly down from 3.3%
in second quarter 2018 due to a lower allocation to tax-exempt
securities.
CONFERENCE CALL
The Hartford will discuss its second quarter 2019 financial
results on a webcast at 9 a.m. EDT on Friday, Aug. 2, 2019. The
call can be accessed via a live listen-only webcast or as a replay
through the Investor Relations section of The Hartford's website at
https://ir.thehartford.com. The replay will be accessible
approximately one hour after the conclusion of the call and be
available along with a transcript of the event for at least one
year.
More detailed financial information can be found in The
Hartford's Investor Financial Supplement for June 30, 2019, and the
Second Quarter 2019 Financial Results Presentation, both of which
are available at https://ir.thehartford.com.
ABOUT THE HARTFORD
The Hartford is a leader in property and casualty insurance,
group benefits and mutual funds. With more than 200 years of
expertise, The Hartford is widely recognized for its service
excellence, sustainability practices, trust and integrity. More
information on the company and its financial performance is
available at https://www.thehartford.com. Follow us on Twitter at
www.twitter.com/TheHartford_PR.
The Hartford Financial Services Group, Inc., (NYSE: HIG)
operates through its subsidiaries under the brand name, The
Hartford, and is headquartered in Hartford, Conn. For additional
details, please read The Hartford’s legal notice at
https://www.thehartford.com/legal-notice.
HIG-F
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THE HARTFORD FINANCIAL
SERVICES GROUP, INC.
CONSOLIDATING INCOME
STATEMENTS
Three Months Ended June 30,
2019
($ in millions)
Commercial Lines
Personal Lines
P&C Other Ops
Group Benefits
Hartford Funds
Corporate
Consolidated
Earned premiums
$
1,987
$
801
$
—
$
1,377
$
—
$
1
$
4,166
Fee income
9
10
—
45
251
11
326
Net investment income
281
46
21
121
2
17
488
Other revenues
—
23
—
—
—
9
32
Net realized capital gains
54
8
4
7
—
7
80
Total revenues
2,331
888
25
1,550
253
45
5,092
Benefits, losses, and loss adjustment
expenses
1,291
569
9
1,062
—
3
2,934
Amortization of DAC
310
65
—
14
3
—
392
Insurance operating costs and other
expenses
402
176
3
324
203
33
1,141
Loss on reinsurance transaction
91
—
—
—
—
—
91
Interest expense
—
—
—
—
—
63
63
Amortization of other intangible
assets
2
2
—
11
—
—
15
Total benefits and expenses
2,096
812
12
1,411
206
99
4,636
Income before income
taxes
235
76
13
139
47
(54
)
456
Income tax expense
44
14
2
26
9
(11
)
84
Income from continuing operations, net
of tax
191
62
11
113
38
(43
)
372
Net income
191
62
11
113
38
(43
)
372
Preferred stock dividends
—
—
—
—
—
—
—
Net income (loss) available to common
stockholders
191
62
11
113
38
(43
)
372
Adjustments to reconcile net income
(loss) available to common stockholders to core earnings
(losses)
Net realized capital losses, excluded from
core earnings, before tax
(54
)
(8
)
(3
)
(6
)
—
(8
)
(79
)
Loss on reinsurance transaction, before
tax
91
—
—
—
—
—
91
Integration and transaction costs, before
tax
6
—
—
10
—
15
31
Change in loss reserves upon acquisition
of a business, before tax
97
—
—
—
—
—
97
Income tax expense
(27
)
1
—
(2
)
—
1
(27
)
Core earnings (losses)
$
304
$
55
$
8
$
115
$
38
$
(35
)
$
485
THE HARTFORD FINANCIAL
SERVICES GROUP, INC.
CONSOLIDATING INCOME
STATEMENTS
Three Months Ended June 30,
2018
($ in millions)
Commercial Lines
Personal Lines
P&C Other Ops
Group Benefits
Hartford Funds
Corporate
Consolidated
Earned premiums
$
1,745
$
856
$
—
$
1,357
$
—
$
—
$
3,958
Fee income
8
10
—
44
261
4
327
Net investment income
242
37
22
115
1
11
428
Other revenues
(1
)
23
—
—
—
2
24
Net realized capital gains (losses)
42
5
3
2
(1
)
1
52
Total revenues
2,036
931
25
1,518
261
18
4,789
Benefits, losses, and loss adjustment
expenses
978
681
16
1,059
—
4
2,738
Amortization of DAC
259
70
—
11
4
—
344
Insurance operating costs and other
expenses
343
174
3
317
211
19
1,067
Loss on extinguishment of debt
—
—
—
—
—
6
6
Interest expense
—
—
—
—
—
79
79
Amortization of other intangible
assets
1
1
—
16
—
—
18
Total benefits and expenses
1,581
926
19
1,403
215
108
4,252
Income (loss) before income
taxes
455
5
6
115
46
(90
)
537
Income tax expense (benefit)
83
(1
)
1
19
9
(8
)
103
Income (loss) from continuing
operations, net of tax
372
6
5
96
37
(82
)
434
Income from discontinued operations, net
of tax
—
—
—
—
—
148
148
Net income
372
6
5
96
37
66
582
Adjustments to reconcile net income to
core earnings (losses)
Net realized capital losses (gains),
excluded from core earnings, before tax
(40
)
(6
)
(3
)
—
1
(2
)
(50
)
Loss on extinguishment of debt, before
tax
—
—
—
—
—
6
6
Integration and transaction costs, before
tax
—
—
—
11
—
—
11
Income tax expense (benefit)
9
2
1
(3
)
—
2
11
Income from discontinued operations, net
of tax
—
—
—
—
—
(148
)
(148
)
Core earnings (losses)
$
341
$
2
$
3
$
104
$
38
$
(76
)
$
412
DISCUSSION OF NON-GAAP FINANCIAL MEASURES
The Hartford uses non-GAAP financial measures in this press
release to assist investors in analyzing the company's operating
performance for the periods presented herein. Because The
Hartford's calculation of these measures may differ from similar
measures used by other companies, investors should be careful when
comparing The Hartford's non-GAAP financial measures to those of
other companies. Definitions and calculations of other financial
measures used in this press release can be found below and in The
Hartford's Investor Financial Supplement for second quarter 2019,
which is available on The Hartford's website,
https://ir.thehartford.com.
Annualized investment yield, excluding
limited partnerships and other alternative investments is
the annualized net investment income on a Consolidated, P&C or
Group Benefits level excluding limited partnerships and other
alternative investments divided by such monthly average invested
assets at amortized cost, excluding repurchase agreement and
securities lending collateral, 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.
Three Months Ended
Jun 30 2019
Jun 30 2018
Jun 30 2019
Jun 30 2018
Jun 30 2019
Jun 30 2018
Consolidated
P&C
Group Benefits
Annualized investment yield, before
tax
4.2
%
3.9
%
4.2
%
4.0
%
4.2
%
4.1
%
Impact on annualized investment yield of
limited partnerships and other alternative investments, before
tax
(0.4
)%
(0.2
)%
(0.4
)%
(0.2
)%
(0.3
)%
(0.2
)%
Annualized investment yield excluding
limited partnerships and other alternative investments, before
tax
3.8
%
3.7
%
3.8
%
3.8
%
3.9
%
3.9
%
Book value per diluted share (excluding
AOCI) is calculated based upon non-GAAP financial measures.
It 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 it 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
U.S. GAAP measure. A reconciliation of book value per diluted
share, including AOCI to book value per diluted share (excluding
AOCI) is set forth below.
As of
Jun 30 2019
Dec 31 2018
Change
Book value per diluted share
$41.00
$35.06
17%
Per diluted share impact of AOCI
$(0.55)
$(4.34)
87%
Book value per diluted share (excluding
AOCI)
$41.55
$39.40
5%
Core Earnings: The Hartford uses
the non-GAAP measure core earnings as an important measure of the
company’s operating performance. The Hartford believes that the
measure core earnings provides investors with a valuable measure of
the performance of the company’s ongoing businesses because it
reveals trends in our insurance and financial services businesses
that may be obscured by including the net effect of certain
realized capital gains and losses, integration and transaction
costs in connection with an acquired business, loss on
extinguishment of debt, gains and losses on reinsurance
transactions, change in loss reserves upon acquisition of a
business, income tax benefit from reduction in deferred income tax
valuation allowance, and results of discontinued operations. Some
realized capital 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 (net of tax) that tend to be highly variable from
period to period based on capital market conditions.
The Hartford believes, however, that some realized capital 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.
Results from discontinued operations are excluded from core
earnings for businesses held for sale because such results could
obscure trends in our ongoing businesses that are valuable to our
investors' ability to assess the company's financial
performance.
Core earnings are net of preferred stock dividends declared
since they 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. The changes to loss reserves upon
acquisition of a business 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 as such trends are valuable to our investors' ability
to assess the Company's financial performance.
Net income (loss), net income (loss) available to common
stockholders and income from continuing operations, net of tax,
available to common stockholders (during periods when the company
reports significant discontinued operations) are the most directly
comparable U.S. GAAP measures to core earnings. Income from
continuing operations, net of tax, available to common stockholders
is net income available to common stockholders, excluding the
income (loss) from discontinued operations, net of tax. Core
earnings should not be considered as a substitute for net income
(loss), net income (loss) available to common stockholders or
income (loss) from continuing operations, net of tax, available to
common stockholders and does not reflect the overall profitability
of the company’s business. Therefore, The Hartford believes that it
is useful for investors to evaluate net income (loss), net income
(loss) available to common stockholders, income (loss) from
continuing operations, net of tax, available to common stockholders
and core earnings when reviewing the company’s performance.
A reconciliation of net income (loss) to core earnings for the
quarterly periods ended June 30, 2019 and 2018, is included in this
press release. A reconciliation of net income (loss) to core
earnings for individual reporting segments can be found in this
press release under the heading "The Hartford Financial Services
Group, Inc. Consolidating Income Statements" and in The Hartford's
Investor Financial Supplement for the quarter ended June 30,
2019.
Core earnings margin: The Hartford
uses the non-GAAP measure core earnings margin to evaluate, and
believes it is an important measure of, the Group Benefits
segment's operating performance. Core earnings margin is calculated
by dividing core earnings by revenues, excluding buyouts and
realized gains (losses). Net income margin is the most directly
comparable U.S. GAAP measure. The company believes that core
earnings margin provides investors with a valuable measure of the
performance of Group Benefits because it reveals trends in the
business that may be obscured by the effect of buyouts and realized
gains (losses). Core earnings margin should not be considered as a
substitute for net income margin and does not reflect the overall
profitability of Group Benefits. Therefore, the company believes it
is important for investors to evaluate both core earnings margin
and net income margin when reviewing performance. A reconciliation
of net income margin to core earnings margin for the quarterly
periods ended June 30, 2019 and 2018, is set forth below.
Three Months Ended
Margin
Jun 30 2019
Jun 30 2018
Change
Net income margin
7.3
%
6.3
%
1.0
Adjustments to reconcile net income
margin to core earnings margin
Net realized capital losses (gains)
excluded from core earnings, before tax
(0.4
)%
—%
(0.4
)
Integration and transaction costs
associated with acquired business, before tax
0.7
%
0.8
%
(0.1
)
Income tax benefit
(0.1
)%
(0.2
)%
0.1
Core earnings margin
7.5
%
6.9
%
0.6
Core earnings per diluted share:
Core earnings per diluted share is calculated based on the non-GAAP
financial measure core earnings. It is calculated by dividing (a)
core earnings, by (b) diluted common shares outstanding. The
Hartford believes that the measure 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 and income (loss) from
continuing operations, net of tax, available to common stockholders
per diluted common share are the most directly comparable GAAP
measures. Core earnings per diluted share should not be considered
as a substitute for net income (loss) available to common
stockholders per diluted common share or income (loss) from
continuing operations, net of tax, available to common stockholders
per diluted common share and does not reflect the overall
profitability of the company's business.
Therefore, The Hartford believes that it is useful for investors
to evaluate net income (loss) available to common stockholders per
diluted common share, income (loss) from continuing operations, net
of tax, 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 (loss) available to
common stockholders per diluted common share to core earnings per
diluted share for the quarterly periods ended June 30, 2019 and
2018 is provided in the table below.
Three Months Ended
Jun 30 2019
Jun 30 2018
Change
PER SHARE DATA
Diluted earnings per common share:
Net income per share1
$1.02
$1.60
(36)%
Preferred stock dividends2
—
—
—%
Net income available to common
stockholders per share1
$1.02
$1.60
(36)%
Income from discontinued operations, after
tax
—
(0.41)
100%
Income from continuing operations, net
of tax, available to common stockholders
$1.02
$1.19
(14)%
Adjustment made to reconcile income
from continuing operations, net of tax, available to common
stockholders to core earnings per share
Net realized capital losses (gains),
excluded from core earnings, before tax
(0.22)
(0.14)
(57)%
Loss on extinguishment of debt, before
tax
—
0.02
(100)%
Loss on reinsurance transactions, before
tax
0.25
—
NM
Integration and transaction costs
associated with an acquired business, before tax
0.08
0.03
167%
Change in loss reserves upon acquisition
of a business, before tax
0.27
—
NM
Income tax expense (benefit) on items
excluded from core earnings
(0.07)
0.03
NM
Core earnings per share
$1.33
$1.13
18%
[1] Net income (loss) available to common stockholders includes
dilutive potential common shares [2] The preferred dividend payable
in May 2019 was declared in February 2019 and is therefore not
reflected in second quarter results
Core Earnings Return on Equity: The
company provides different measures of the return on stockholders'
equity (“ROE”). Net income (loss) available to common stockholders
ROE ("net income (loss) ROE) is calculated by dividing (a) net
income (loss) available to common stockholders for the prior four
fiscal quarters by (b) average common stockholders' equity,
including AOCI. Core earnings ROE is calculated based on non-GAAP
financial measures. Core earnings ROE is calculated by dividing (a)
core earnings for the prior four fiscal quarters by (b) average
common stockholders' equity, excluding AOCI. Net income ROE is the
most directly comparable U.S. GAAP measure. The company excludes
AOCI in the calculation of core earnings ROE to provide investors
with a measure of how effectively the company is investing the
portion of the company's net worth that is primarily attributable
to the company's business operations. The company provides to
investors return on equity measures based on its non-GAAP core
earnings financial measures for the reasons set forth in the
related discussion above.
A reconciliation of consolidated net income (loss) ROE to
Consolidated Core earnings ROE is set forth below.
Last Twelve Months
Ended
Jun 30 2019
Jun 30 2018
Net income (loss) available to common
stockholders ROE
11.8%
(15.4)%
Adjustments to reconcile net income
(loss) available to common stockholders ROE to core earnings
ROE
Net realized capital gains excluded from
core earnings, before tax
(0.7)
(0.7)
Loss on reinsurance transactions, before
tax
0.7
—
Pension settlement, before tax
—
—
Integration and transaction costs
associated with an acquired business, before tax
0.5
0.3
Changes in loss reserves upon acquisition
of a business, before tax
0.7
—
Income tax expense (benefit) on items not
included in core earnings
(0.5)
6.1
Loss (income) from discontinued
operations, after tax
—
18.4
Impact of AOCI, excluded from core
earnings ROE
(0.8)
(0.3)
Core earnings ROE
11.7%
8.4%
Net investment income, excluding limited
partnerships and other alternative investments: is the
amount of net investment income, on a Consolidated, P&C or
Group Benefits level earned from such 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.
Three Months Ended
Jun 30 2019
Jun 30 2018
Jun 30 2019
Jun 30 2018
Jun 30 2019
Jun 30 2018
Consolidated
P&C
Group Benefits
Total net investment income
$488
$428
$348
$301
$121
$115
Income from limited partnerships and other
alternative assets
(60
)
(39
)
(50
)
(33
)
(10
)
(6
)
Net investment income excluding limited
partnerships and other alternative investments
$428
$389
$298
$268
$111
$109
Underlying combined ratio: is a
non-GAAP financial measure that 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 combined ratio is the sum of the loss and loss
adjustment expense ratio (also known as a loss ratio), the expense
ratio and the policyholder dividend ratio. This ratio measures the
cost of losses and expenses for every $100 of earned premiums. A
combined ratio below 100 demonstrates a positive underwriting
result. A combined ratio above 100 indicates a negative
underwriting result. A combined ratio above 100 indicates a
negative underwriting result. The underlying combined ratio
represents the combined ratio for the current accident year,
excluding the impact of current accident year catastrophes and
current accident year change in loss reserves upon acquisition of a
business. 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, 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 press release under the heading "Second Quarter
2019 Segment Financial Results Summary."
Underwriting gain (loss): The
Hartford's management evaluates profitability of the Commercial and
Personal Lines segments primarily on the basis of underwriting gain
or loss. Underwriting gain (loss) is a before tax measure that
represents earned premiums less incurred losses, loss adjustment
expenses and underwriting expenses. Net income (loss) is the most
directly comparable GAAP measure. Underwriting gain (loss) is
influenced significantly by earned premium growth and the adequacy
of The Hartford's pricing. Underwriting profitability over time is
also greatly influenced by The Hartford's underwriting discipline,
as management strives to manage exposure to loss through favorable
risk selection and diversification, effective management of claims,
use of reinsurance and its ability to manage its expenses. The
Hartford believes that the measure underwriting gain (loss)
provides investors with a valuable measure of profitability, before
tax, derived from underwriting activities, which are managed
separately from the company's investing activities. A
reconciliation of net income to underwriting results for the
quarterly periods ended June 30, 2019 and 2018, is set forth
below.
Underlying underwriting gain
(loss): 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 June
30, 2019 and 2018, is set forth below:
PROPERTY &
CASUALTY
Three Months Ended
Jun 30 2019
Jun 30 2018
Net income
$
264
$
383
Adjustments to reconcile net income to
underwriting gain (loss)
Net investment income
(348
)
(301
)
Net realized capital losses (gains)
(66
)
(50
)
Net servicing and other income
2
(3
)
Loss on reinsurance transaction
91
—
Income tax expense
60
83
Underwriting gain (loss)
3
112
Adjustments to reconcile underwriting
gain (loss) to underlying underwriting gain
Current accident year catastrophes
138
188
Prior accident year development
35
(47
)
Current accident year change in loss
reserves upon acquisition of a business
29
—
Underlying underwriting gain
$
205
$
253
COMMERCIAL LINES
Three Months Ended
Jun 30 2019
Jun 30 2018
Net income
$
191
$
372
Adjustments to reconcile net income to
underwriting gain
Net servicing loss (income)
(2
)
(1
)
Net investment income
(281
)
(242
)
Net realized capital losses (gains)
(54
)
(42
)
Other expense (income)
6
3
Loss on reinsurance transaction
91
—
Income tax expense
44
83
Underwriting gain
(5
)
173
Adjustments to reconcile underwriting
gain to underlying underwriting gain
Current accident year catastrophes
90
74
Prior accident year development
22
(73
)
Current accident year change in loss
reserves upon acquisition of a business
29
—
Underlying underwriting gain
$
136
$
174
PERSONAL LINES
Three Months Ended
Jun 30 2019
Jun 30 2018
Net income
$
62
$
6
Adjustments to reconcile net income to
underwriting gain
Net servicing income
(4
)
(4
)
Net investment income
(46
)
(37
)
Net realized capital losses (gains)
(8
)
(5
)
Other expense (income)
2
(1
)
Income tax expense (benefit)
14
(1
)
Underwriting gain
20
(42
)
Adjustments to reconcile underwriting
gain to underlying underwriting gain
Current accident year catastrophes
48
114
Prior accident year development
4
10
Underlying underwriting gain
$
72
$
82
SAFE HARBOR STATEMENT
Some of the statements in this release should be considered
forward-looking statements as defined in 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 the future. Examples of forward-looking statements
include, but are not limited to, statements the company makes
regarding future results of operations. The Hartford cautions
investors that these forward-looking statements are not guarantees
of future performance, and actual results may differ materially.
Investors should consider the important risks and uncertainties
that may cause actual results to differ. These important risks and
uncertainties include the risks and uncertainties identified below,
as well as factors described in such forward-looking statements or
in The Hartford's 2018 Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q and other filings The Hartford makes with the
Securities and Exchange Commission.
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; financial
risk related to the continued reinvestment of our investment
portfolios; market risks associated with our business, including
changes in credit spreads, equity prices, interest rates, inflation
rate 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; the risks associated with the
change in or replacement of the London Inter-Bank Offered Rate
(LIBOR) on the securities we hold or may have issued, other
financial instruments and any other assets and liabilities whose
value is tied to LIBOR; the impacts associated with the withdrawal
of the United Kingdom (“U.K.”) from the European Union (“E.U.”) on
our international operations in the U.K. and E.U.;
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, 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 storms, 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 property and casualty 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, such as usage-based methods of
determining premiums, advancements in automotive safety features,
the development of autonomous vehicles, and platforms that
facilitate ride sharing, which may alter demand for the company's
products, impact the frequency or severity of losses, and/or impact
the way the company markets, distributes and underwrites its
products; 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;
Financial Strength, Credit and
Counterparty Risks: the impact on capital requirements due
to various factors, including many that are outside the company’s
control, such as National Association of Insurance Commissioners
risk based capital formulas, Funds at Lloyd's and Solvency Capital
Requirements, which can in turn affect our credit and financial
strength ratings, cost of capital, regulatory compliance and other
aspects of our business and results; 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; losses due to nonperformance or
defaults by others, including credit risk with counterparties
associated with investments, derivatives, premiums receivable,
reinsurance recoverables and indemnifications provided by third
parties in connection with previous dispositions; the potential for
losses due to our reinsurers' unwillingness or inability to meet
their obligations under reinsurance contracts and the availability,
pricing and adequacy of reinsurance to protect us against losses;
state and international regulatory limitations on the ability of
the company and certain of its subsidiaries to declare and pay
dividends;
Risks Relating to Estimates, Assumptions
and Valuations: risk associated with the use of analytical
models in making decisions in key areas such as underwriting,
capital management, reserving, 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
other-than-temporary impairments on available-for-sale securities;
the potential for further impairments of our goodwill or the
potential for changes in valuation allowances against deferred tax
assets;
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, which may include
acquisitions, divestitures or restructurings; risks associated with
acquisitions and divestitures including the challenges of
integrating acquired companies or businesses or separating from our
divested businesses that may result in our not being able 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; and 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 changes in 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 other legal developments; the impact of changes in
federal or state 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
release 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190801006023/en/
Media Contacts Michelle Loxton 860-547-7413
michelle.loxton@thehartford.com Matthew Sturdevant 860-547-8664
matthew.sturdevant@thehartford.com Investor Contact Sabra
Purtill, CFA 860-547-8691 sabra.purtill@thehartford.com Susan
Spivak Bernstein 860-547-6233 susan.spivak@thehartford.com
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