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Hartford Financial (HIG) Q3 Earnings Beat, Revenues Down Y/Y

Zacks Equity Research
·5 min read

The Hartford Financial Services Group, Inc. HIG reported third-quarter 2020 adjusted operating earnings of $1.46 per share, which surpassed the Zacks Consensus Estimate by 65.9%. However, the bottom line fell 2.7% year over year.

The company’s results reflect lower costs partly offset by higher catastrophe losses and losses incurred on the company’s retained equity interest in Talcott Resolution and softer revenues.

Total operating revenues of $3.4 billion plunged 35% year over year on account of weak revenues stemming from the company’s Commercial Lines, Personal Lines, P&C Other Ops, Group Benefits and Corporate segments. Nevertheless, the top line also surpassed the Zacks Consensus Estimate by 0.1%.

Net investment income inched up 0.4% year over year to $492 million in the third quarter. The upside can be attributed to increased limited partnership income partially offset by reinvesting fixed maturities at lower rates and reduced yields on floating rate investments.

Total benefits, losses and expenses of $4.6 billion declined 1.2% year over year, primarily due to lower amortization of DAC, insurance operating costs and other expenses, interest expense and amortization of intangible assets.

The Hartford Financial Services Group, Inc. Price, Consensus and EPS Surprise

The Hartford Financial Services Group, Inc. Price, Consensus and EPS Surprise
The Hartford Financial Services Group, Inc. Price, Consensus and EPS Surprise

The Hartford Financial Services Group, Inc. price-consensus-eps-surprise-chart | The Hartford Financial Services Group, Inc. Quote

Segmental Results

Property & Casualty (P&C)   

Commercial Line

During the quarter under review, the segment’s total revenues of $2.6 billion were down 2.3% year over year.

Net income of $323 million dropped 4% year over year. It also reported core earnings of $349 million, which improved 15% year over year. This can be attributed to improved underwriting gain on account of reduced underwriting expenses and increased net favourable prior accident year development. However, the upside was partially negated by incurred losses related to COVID-19 and elevated CATs.

The segment’s underlying combined ratio was 95.9%, improving 50 basis points (bps) in the quarter under review.

Personal Lines

Total revenues were $854 million, down 4% year over year.

Net income of $79 million declined 16% year over year. Core earnings of $77 million slid 11% from the year-ago quarter, primarily due to elevated CAY CAT losses and reduced net investment income. Nevertheless, the downside was partly mitigated by favorable auto frequency, decline in non-CAT losses in homeowners, and reduced underwriting expenses.

Underlying combined ratio of the segment deteriorated 50 bps year over year to 93.3% in the quarter under review.

P&C Other Ops

Revenues grossed $16 million, down 36% year over year.

Group Benefits

Group Benefits’ total revenues of $1.5 billion decreased 2% year over year.

Net income of $119 million declined 18% year over year. Core earnings of $116 million in the third quarter fell 18% year over year. This downside was due to incurred losses stemming from the COVID-19 pandemic in group life and disability. Nevertheless, the results were partly mitigated by reduced insurance operating costs and other expenses.

Total loss ratio of 73.8% deteriorated 270 bps from the year-earlier quarter, riding on higher group disability and group life loss ratio.

Hartford Funds

Hartford Funds’ operating revenues of $256 million remained unchanged year over year.

Hartford Funds reported net income of $44 million, which improved 10% year over year driven by higher net realized capital gains and reduced operating costs. Core earnings of $40 million climbed 3% year over year due to reduced variable operating expenses.

Average daily AUM of $122.5 billion was up 2% from the year-ago figure.

Corporate

Operating revenues were $8 million, which plunged 83.7% year over year.

The segment’s core loss of $57 million was wider than the $37 million loss incurred in the prior-year quarter. This was primarily owing to losses incurred from the company's retained equity interest in Talcott Resolution.

The segment reported net loss of $108 million, which was wider than the year-ago quarter’s net loss of $99 million.

Dividend Update

On Oct 21, Hartford Financial declared quarterly dividend of 32.5 cents per share. The dividend will be paid on Jan 5, 2021 to shareholders of record as of Dec 1, 2020.

Financial Update

Book value per share as of Sep 30, 2020 was up 11% to $48.47 from the level as of Dec 31, 2019.

Core earnings’ return on equity remained flat year over year at 12.3%.

Zacks Rank & Performance of Other Players

Hartford Financial carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Of the insurance industry players, which have reported third-quarter results so far, earnings of Old Republic International Corporation ORI, W. R. Berkley Corporation WRB and RLI Corp. RLI beat the respective Zacks Consensus Estimate.

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W.R. Berkley Corporation (WRB) : Free Stock Analysis Report
 
The Hartford Financial Services Group, Inc. (HIG) : Free Stock Analysis Report
 
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