Hartford Financial (HIG) Q4 Earnings Top on Earned Premiums
The Hartford Financial Services Group, Inc. HIG reported fourth-quarter 2023 adjusted operating earnings of $3.06 per share, which surpassed the Zacks Consensus Estimate by 28%. The bottom line climbed 32% year over year.
Operating revenues of HIG amounted to $4.3 billion, which improved 7.6% year over year in the quarter under review. The top line beat the consensus mark by a whisker.
The quarterly results were aided by improved property and casualty (“P&C) earned premiums and a year-over-year decline in catastrophe losses. Fully insured ongoing premiums in the Group Benefits business also contributed to the sound performance. The decline in incentive compensation and incremental savings derived from the Hartford Next initiative led to an improvement in expense ratio across the P&C and Group Benefits businesses. However, the upside was partly offset by elevated benefits, losses and loss adjustment expenses.
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
Q4 Operations
Earned premiums of Hartford Financial rose 8.2% year over year to $5.43 billion in the fourth quarter, higher than the Zacks Consensus Estimate of $5.41 billion and our estimate of $5.35 billion.
Pre-tax net investment income of $653 million grew 2% year over year and beat the consensus mark of $623 million but missed our estimate of $697.6 million. The year-over-year growth came on the back of improved returns from the fixed-income portfolio. Net investment income witnessed year-over-year growth in each of the segments barring Group Benefits.
Total benefits, losses and expenses increased 3.2% year over year to $5.5 billion in the quarter under review, which came higher than our estimate of $5.4 billion. The year-over-year increase was due to higher benefits, losses and loss adjustment expenses, amortization of deferred policy acquisition costs and insurance operating expenses.
Pretax income of $950 million advanced 29.3% year over year in the fourth quarter and outpaced our estimate of $858.3 million.
Segmental Update
P&C
Commercial Lines
Revenues in the segment amounted to $3.4 billion in the fourth quarter, which advanced 7.8% year over year. Core earnings of $723 million climbed 29% year over year on the back of higher earned premiums, a decline in catastrophe losses, an increase in net favorable prior accident year development within core earnings and growing net investment income.
The underlying combined ratio improved 80 bps year over year to 86.6%, attributable to a 110-bps improvement in the expense ratio.
Personal Lines
The segment recorded revenues of $876 million, which improved 6.6% year over year. However, core earnings fell 14% year over year to $36 million in the quarter under review and were short of our estimate of $43.7 million. Higher severity of auto liability and physical damage inflicted adversity on the unit’s performance.
The underlying combined ratio of 99.5% deteriorated 330 bps year over year.
P&C Other Ops
Revenues of $17 million declined 5.6% year over year in the fourth quarter.
Group Benefits
The segment’s revenues grew 4.2% year over year to $1.8 billion in the quarter under review, which almost touched our estimate. Core earnings of $174 million rose 21% year over year on the back of expanding fully insured ongoing premiums and net income.
The loss ratio improved 350 bps year over year to 69.9% as a result of a reduced mortality level and recovery of long-term disability claims.
Hartford Funds
Revenues amounted to $254 million, which inched up 0.8% year over year in the fourth quarter and beat our estimate of $221.7 million. Core earnings remained flat year over year at $39 million, higher than our estimate of $33.4 million.
The segment’s daily average assets under management remained relatively flat year over year at $124.7 billion.
Corporate
The segment’s revenues climbed 25% year over year to $45 million. The unit incurred a core loss of $36 million in the quarter under review, wider than the year-ago quarter’s loss of $33 million due to escalating operating expenses and a decline in fee income.
Financial Update (as of Dec 31, 2023)
Hartford Financial exited the fourth quarter with cash of $126 million, which plunged 45% from the 2022-end level. Total investments of $55.9 billion rose 6.4% from the 2022-end figure.
Total assets of $76.8 billion increased 5.2% from the figure at 2022 end.
Debt amounted to $4.4 billion, which inched up marginally from the figure as of Dec 31, 2022.
Total stockholders’ equity improved 12.1% from the 2022-end level to $15.3 billion.
Book value per share was $49.43, which grew 19% year over year.
Core earnings’ return on equity in the trailing 12 months improved 130 bps year over year to 15.8% at the fourth-quarter end.
Share Repurchase Update
Hartford Financial returned $479 million to shareholders via share buybacks of $350 million and common stockholder dividends of $129 million. Under its $3-billion share repurchase program that will run till 2024 end, HIG had a leftover buyback capacity of $1.35 billion as of Dec 31, 2023.
Full-Year Update
Adjusted operating earnings of Hartford Financial were $8.88 per share for 2023, which advanced 17% year over year. Revenues improved 9.7% year over year to $24.5 billion.
Earned premiums of $21 billion grew 8.4% year over year in 2023. Net investment income increased 5.9% year over year to $2.3 billion.
Zacks Rank
Hartford Financial currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Insurers
Of the insurance industry players that have reported fourth-quarter 2023 results so far, the bottom-line results of AXIS Capital Holdings Limited AXS, Selective Insurance Group, Inc. SIGI and RenaissanceRe Holdings Ltd. RNR beat the respective Zacks Consensus Estimate.
AXIS Capital posted fourth-quarter 2023 operating income of $2.94 per share, in contrast to the Zacks Consensus Estimate of a loss of $1.25 per share. The bottom line increased 50.8% year over year. Total operating revenues of $1.5 billion beat the consensus estimate by 2.7%. The top line, however, declined 2.1% year over year on lower premiums earned. Net premiums written decreased 2% to $1.1 billion, attributable to a 51% decline in the Reinsurance segment, partially offset by a 9% increase in the Insurance segment.
Net investment income increased 27.2% year over year to $187 million. AXS incurred an underwriting loss of $274.1 million against the year-ago income of $132 million. The combined ratio deteriorated 3050 bps to 124.6. The consensus estimate was pegged at 115, while our estimate was 131.
Selective Insurance’s fourth-quarter 2023 operating income of $1.94 per share beat the Zacks Consensus Estimate by 1%. The bottom line increased 32.9% from the year-ago quarter. Total revenues of $1.1 billion increased 15.4% from the year-ago quarter’s figure. The top line missed the consensus estimate by 0.7%. On a year-over-year basis, net premiums written increased 17% to $991 million.
The average renewal pure price increased 7.4%, with stable retention and increased exposure. After-tax net investment income increased 20% year over year to $78 million. The after-tax net underwriting income of SIGI was $52 million, which increased 38% year over year. The combined ratio of 93.7 improved 100 bps year over year. Standard Commercial Lines’ net premiums written were up 13% year over year to $764.3 million.
RenaissanceRe reported fourth-quarter 2023 operating income of $11.77 per share, which beat the Zacks Consensus Estimate by 44.8%. The bottom line increased 60.6% year over year. Total operating revenues increased 42.5% year over year to $2.6 billion in the fourth quarter. The top line outpaced the consensus mark by 19.6%.
Gross premiums written of $1.8 billion increased 13.7% year over year in the fourth quarter. Net premiums earned improved 38.5% year over year to $2.2 billion. RNR’s net investment income amounted to $377 million, which increased 11.6% year over year in the quarter under review. It reported an underwriting income of $541 million, which surged 71% year over year. The combined ratio improved 450 bps year over year to 76% in the fourth quarter.
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