Hartford Financial (HIG) Announces Q2 Preliminary Results
The Hartford Financial Services Group, Inc. HIG provided a preliminary estimate of $1.29 per share for second-quarter 2020 net income available to common stockholders and $1.22 for the same period's core earnings.
Inside the Headlines
The results include the estimated effect of losses induced by the COVID-19 pandemic along with rise in credit allowance, current accident year catastrophes, net prior accident year reserve development, net investment income and other items.
Hartford Financial expects incurred losses of $198 million, after tax, from COVID-19 for the to-be-reported quarter.
Hartford Financial’s second-quarter net investment income is expected to be $339 million, before tax, mainly due to loss from limited partnerships and other investments.
In the Property & Casualty segment, incurred losses due to COVID-19 are estimated to be $213 million, before tax. It consists of reserves for business interruption claims on property policies, workers’ compensation net of favorable frequency and financial lines.
For the Group Benefits segment, expected COVID-19 incurred losses are $38 million, before tax, related mostly to group life claims.
The estimate of net income and core earnings consists of benefit of favorable frequency in Personal Lines auto, partly offset by related refund of $81 million to Personal Lines auto customers, which accounts for 15% of second-quarter premium.
The company also intends to trim its estimate for audit premiums due from business customers by $100 million in the second quarter. This can be attributed to workers’ compensation policies due to lower estimated payrolls. However, the net impact on income is projected to be a decline of $34 million, before tax, due to related decrease in incurred losses and commissions.
Additionally, Hartford Financial intends to enhance its allowance for credit losses on premiums receivable by $44 million before tax, considering higher expected uncollectible receivables stemming from the COVID-19 impact on economy.
Current accident year catastrophe losses are estimated at around $196 million, after tax, in the second quarter, which consists of wind and hail events as well as civil unrest in the United States.
For the to-be-reported quarter, Hartford Financial projects net favorable reserve development of $268 million, before tax, which includes reduction in reserves for prior-year catastrophes.
This net favorable reserve development includes a $102-million, before tax, rise in reserves for sexual molestation and abuse claims.
The favorable catastrophe reserve development comprises a decline in estimated losses from many wind and hail events that took place in 2018 and 2019 as well as from the California wildfires of 2017 and 2018.
Its forecast for net prior accident year development consists of reserve increases of $54 million, before tax, on legacy Navigators reserves for 2018 and the previous accident years.
The projected reinsurance benefit of $54 million, before tax, will be reckoned as a delayed gain under retroactive reinsurance accounting with the charge against income for the deferred gain recognized as part net income and not included in core earnings.
The consensus mark for second-quarter earnings per share is pegged at 97 cents, indicating a decline of 27.1% from the year-ago reported figure.
The company will release final second-quarter results in detail on Jul 30.
Zacks Rank and Price Performance
Shares of this presently Zacks Rank #4 (Sell) player have lost 28.1% in a year’s time, wider than its industry’s decrease of 22%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Stocks to Consider
Other companies in the same space, such as Aflac Incorporated AFL, Chubb Limited CB and American International Group, Inc. AIG have also shed 33.2%, 9.7% and 40.7% of value, respectively, in the same time frame. All stocks currently carry a Zacks Rank #3 (Hold).
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