Hartford Financial (HIG) Q3 Earnings Top, Revenues Up Y/Y
The Hartford Financial Services Group, Inc. HIG reported third-quarter 2018 adjusted operating earnings of $1.15 per share, beating the Zacks Consensus Estimate by 10.5%. The bottom line shot up nearly 92% year over year.
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. Quote
The quarter benefited from better P&C underwriting results, driven by lower current accident year catastrophe losses and higher favorable prior-year development. This apart, improved Group Benefits business, backed by a contribution from the acquisition transacted during fourth-quarter 2017, increased Mutual Funds assets under management as well as a lower tax rate aided the upside.
Total operating revenues came in at $4.8 billion, up 15.5% year over year, primarily driven by a rise in earned premiums, fee income and net investment income.
Quarterly Segment Results
Property & Casualty (P&C)
Total revenues were $2.1 billion, up 4.3% year over year.
Net income of $289 million rose 9.1% year over year, driven by lower current accident year catastrophe losses, higher favorable PYD and the effect of a lower U.S. corporate tax rate. Core earnings of $265 million increased more than three-fold year over year.
Underlying combined ratio of 93.7% deteriorated 50 basis points year over year.
Current accident year pre-tax catastrophe loss came in at $95 million (stemming from Hurricane Florence and multiple wind, hail and wildfire events), down from $270 million in the year-ago quarter.
Personal Lines total revenues were $927 million, down 6.7% year over year.
Net income of $51 million increased from $8 million in the year-ago period. Core earnings also totaled $47 million compared with $7 million in the third quarter of 2017. This was mainly owing to an improved auto underlying underwriting gain, a change to net favorable PYD, lower current accident year catastrophe losses and the effect of a lower U.S. corporate tax rate.
Current accident year catastrophe loss amounted to $74 million (stemming from wind, hail and wildfire events), narrower than $85 million incurred in the prior-year period.
The underlying combined ratio of 91.8% improved 310 basis points from the year-earlier period.
P&C Other Ops
Revenues of this segment grossed $25 million, down 7.4% year over year.
Net income and core earnings summed $9 million and $8 million, respectively. Both metrics are down 50% and 55.6%, each, from the year-ago quarterly counts.
Group Benefits’ total revenues of $1.51 billion soared 63% year over year.
Net income of $77 million increased 8.5% year over year on higher premiums and net investment income. Core earnings were $102 million, up 55% year over year.
Total loss ratio of 75.5% deteriorated 80 bps year over year as a lower group life loss ratio was more than offset by a higher group disability loss ratio.
Mutual Funds operating revenues grew 6.3% year over year to $268 million.
Mutual Funds net income as well as core income was $41 million, up 57.7% year over year, primarily on growth in Mutual Funds segment assets under management (AUM) as well as the lower U.S. corporate tax rate.
Average AUM increased 8% to $121 billion because of market appreciation and positive net flows over the past year.
Corporate segment operating revenues rose to $40 million from $7 million in the year-ago quarter.
Corporate net loss was $35 million versus net income of $21 million.
The Corporate segment suffered core losses of $45 million, narrower than $68 million incurred in the prior-year period, on the back of higher net investment income and lower interest expense, partially offset by a lower tax benefit due to the lower U.S. corporate tax rate.
Book value per share as of Sep 30, 2018 declined 6% to $34.95 from the level as of Dec 31, 2017.
Core earnings’ return on equity for the first nine months of 2018 is 12.7%.
Zacks Rank and Performance of Other Insurers
Hartford Financial has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Among other players from the insurance industry having reported third-quarter earnings so far, the bottom line of The Progressive Corporation PGR and MGIC Investment Corporation MTG beat the respective Zacks Consensus Estimate while that of RLI Corp. RLI missed the same.
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