The Hartford (NYSE: HIG) today announced preliminary earnings
estimates for second quarter 2020, including net income available
to common stockholders of $463 million, or $1.29 per diluted share,
and core earnings* of $438 million, or $1.22 per diluted share.
Included in its estimate of earnings for the second quarter are
the estimated effects of COVID-19 incurred losses, increases in
credit allowances, current accident year catastrophes, net prior
accident year reserve development, net investment income and other
items as discussed below.
The company estimates second quarter 2020 incurred losses
related to COVID-19 of $251 million, before tax, or $198 million,
after tax. Estimated COVID-19 incurred losses in Property &
Casualty of $213 million, before tax, is largely comprised of
reserves for business interruption claims on property policies,
workers’ compensation net of favorable frequency, and financial
lines. Reserves for business interruption claims pertain to those
policies in middle and large commercial and in global specialty
that do not require direct physical loss or damage. COVID-19
property losses also include reserves for estimated legal costs to
defend lawsuits for business interruption claims where the contract
requires direct physical loss or damage to trigger coverage.
Workers’ compensation COVID-19 losses include an estimate for
presumptive losses, relating to states that have passed laws or
issued executive orders or agency rules providing for the
presumption of coverage for certain industry classes, including
health care and other essential workers. Expected COVID-19 incurred
losses in Group Benefits of $38 million, before tax, relate mostly
to group life claims.
The estimate of net income and core earnings includes the
benefit of favorable frequency in Personal Lines auto, partially
offset by the related refund of $81 million to Personal Lines auto
customers representing 15% of their second quarter premium.
In addition, in the second quarter of 2020, the company expects
to reduce its estimate of audit premiums due from business
customers by $100 million, principally on workers’ compensation
policies due to lower estimated payrolls, though the net effect on
income is expected to be a decrease of $34 million, before tax, due
to the related reduction in incurred losses and commissions.
* 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
In addition to COVID-19 incurred losses, the company plans to
increase its allowance for credit losses on premiums receivable by
$44 million, before tax, given higher expected uncollectible
receivables due to the economic effects of COVID-19.
Current accident year catastrophe losses are expected to equal
$248 million, before tax, or $196 million, after tax, in the
quarter which includes $138 million, before tax, for wind and hail
events as well as $110 million, before tax, related to civil unrest
in the United States.
For the quarter, the company expects net favorable reserve
development of $268 million, before tax, including a $400 million,
before tax, reduction in reserves for prior year catastrophes. This
net favorable reserve development includes a $102 million, before
tax, increase in reserves for sexual molestation and abuse claims.
The favorable catastrophe reserve development includes a reduction
in estimated losses from various wind and hail events in 2018 and
2019 and from the 2017 and 2018 California wildfires, including
recognizing a subrogation recoverable from PG&E in the amount
of $289 million, before tax, or $228 million, after tax. The
company’s estimate of net prior accident year development also
includes reserve increases of $54 million, before tax, on legacy
Navigators reserves for the 2018 and prior accident years, which is
ceded to National Indemnity Company under an adverse development
cover. The expected reinsurance benefit of $54 million, before tax,
would be recognized as a deferred gain under retroactive
reinsurance accounting with the charge against income for the
deferred gain recognized in net income but not in core
earnings.
The company expects net investment income in second quarter 2020
of $339 million, before tax, primarily due to an estimated $71
million, before tax, loss on limited partnerships and other
alternative investments.
The Hartford will release second quarter 2020 financial results
at approximately 4:15 p.m. EDT on Thursday, July 30, and will host
a webcast at 9 a.m. EDT on Friday, July 31, to discuss the results.
The webcast will be available on the investor relations section of
the company’s website, https://ir.thehartford.com, and then
available for replay along with a transcript of the event for at
least one year.
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 https://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, Connecticut. For
additional details, please read
https://www.thehartford.com/legal-notice.
HIG-F
Some of the statements in this release may 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 future periods. The forward-looking
statements in this press release provide preliminary information
based on the company’s current estimates and expectations, and
remain subject to change and finalization based on management’s
ongoing review of results of the quarter and completion of all
quarter-end close processes. We caution 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 (i) the inherent difficulties in arriving at
such estimates; (ii) the impact of the COVID-19 pandemic and
related economic conditions; (iii) potential legislative,
regulatory, and judicial responses to the pandemic; and (iv) other
risks and uncertainties discussed in our 2019 Annual Report on Form
10-K, subsequent Quarterly Reports on Forms 10-Q, and the other
filings we make with the Securities and Exchange Commission. We
assume no obligation to update this release, which speaks as of the
date issued.
From time to time, The Hartford may use its website and/or
social media outlets, such as Twitter and Facebook, to disseminate
material company information. Financial and other important
information regarding The Hartford is routinely accessible through
and posted on our website at https://ir.thehartford.com, Twitter account at
www.twitter.com/TheHartford_pr and
Facebook at https://facebook.com/thehartford. In addition, you
may automatically receive email alerts and other information about
The Hartford when you enroll your email address by visiting the
“Email Alerts” section at https://ir.thehartford.com.
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.
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
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 items.
Therefore, the following items are excluded from core earnings:
- Certain realized capital gains and losses - 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 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.
- Integration and transaction costs in connection with an
acquired business - As transaction costs are incurred upon
acquisition of a business and integration costs are completed
within a short period after an acquisition, they do not represent
ongoing costs 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.
- 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.
- Change in valuation allowance on deferred taxes related to
non-core components of pre-tax income - These changes in valuation
allowances are excluded from core earnings because they relate to
non-core components of pre-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.
- Deferred gain resulting from retroactive reinsurance and
subsequent changes in the deferred gain - Retroactive reinsurance
agreements economically transfer risk to the reinsurers and
including the full benefit from retroactive reinsurance in core
earnings provides greater insight into the economics of the
business.
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
available to common stockholders, 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 U.S. GAAP measures to
core earnings. Core earnings should not be considered as a
substitute for net income (loss) or net income (loss) 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, and core earnings when
reviewing the Company’s performance.
A reconciliation of net income (loss) available to common
stockholders to core earnings for the quarter ending June 30, 2020
can be found below.
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 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 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
(loss) available to common stockholders per diluted common share to
core earnings per diluted share for the quarterly period ended June
30, 2020 is provided in the table below.
Earnings
Per Diluted Share
Net income available to common
stockholders
$463
$1.29
Adjustment made to reconcile net income
available to common stockholders to core earnings
Net realized capital gains, excluded from
core earnings, before tax
(107)
(0.30)
Integration and transaction costs
associated with an acquired business, before tax
13
0.04
Change in deferred gain on retroactive
reinsurance, before tax
54
0.15
Income tax expense on items excluded from
core earnings
15
0.04
Core earnings
$438
$1.22
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200715005861/en/
Media Contact: Matthew Sturdevant 860-547-8664
matthew.sturdevant@thehartford.com
Investor Contact: Susan Spivak Bernstein 860-547-6233
susan.spivak@thehartford.com
Hartford Financial Servi... (NYSE:HIG)
Historical Stock Chart
From Aug 2024 to Sep 2024
Hartford Financial Servi... (NYSE:HIG)
Historical Stock Chart
From Sep 2023 to Sep 2024