Hartford Modifies 3Q Results
Last week, Hartford Financial Services Group Inc. (HIG) amended its financial results for the third quarter of 2012 through a regulatory filing. The company announced a $388 million post-tax loss related to the sale of the Individual Life business for the quarter, reflecting goodwill impairment and the establishment of a loss accrual for premium deficiency.
Hartford Financial proclaimed that the financial statements for the third quarter, filed earlier, are no longer reliable due to the modification. The company also confessed to the presence of a weakness in its internal control in the earlier reported financial result, which was rectified by the end of 2012.
Hartford Financial had earlier announced that it did not expect any material gain or loss related to the divestiture of the Individual Life business. However, this assumption was due to the omission of the effect of some reinsurance recoverable balances from the calculation, the inclusion of which led to a post-tax GAAP loss of $393 million.
As a result of the amendment, net income of $350 million for 2012, as reported earlier, was reduced to a net loss of $38 million. Moreover, the shareholders’ equity as of Dec 31, 2012 was reduced marginally to $22.4 million from $22.8 million reported earlier. However, the core earnings of $1.4 billion for 2012 were not altered.
The statutory capital benefit of $2.2 billion, derived from the sale of Individual Life, Retirement Plans and Woodbury Financial Services, also remained unchanged. Further, Hartford Financial’s capital management plans, announced with the fourth-quarter results, remained unaltered. The company recognized a $5 million net realized investment loss related to the sale in the fourth quarter of 2012.
Hartford Financial currently carries a Zacks Rank #4 (Sell). Other multi-line insurers worth considering are Ageas SA/NV (AGESY), Assured Guaranty Ltd. (AGO) and CNO Financial Group Inc. (CNO). All these companies carry a Zacks Rank #1 (Strong Buy).
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